Rivian Automobiles‘S (RIVN -5.23%) The stock fell 7% on August 7 after the company reported a mixed second-quarter report. The electric vehicle (EV) maker’s revenue rose 3% year over year to $1.16 billion, beating analysts’ expectations by $20 million.

However, net loss widened to $1.46 billion, or $1.46 per share, from $1.2 billion, which was $0.21 below consensus forecasts. The loss on adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) narrowed slightly to $860 million, from $861 million. Those headline numbers weren’t impressive, but Rivian had already warned investors of a slowdown this year as it focused on upgrading its plants rather than increasing its shipments. Rivian stock could remain in the penalty box for at least a few more quarters, but is it worth accumulating now at an 80% discount to the IPO price?

Image source: Rivian.

What does Rivian expect in the next few years?

Rivian sells the R1T pickup and R1S SUV for the mainstream electric vehicle market and also manufactures customized electric delivery vans for its top investor, AmazonThe company plans to launch its lower-priced R2 SUV in 2026, followed by the higher-end R3 and R3X SUVs in late 2026 to early 2027. The company will also continue to fulfill Amazon’s long-term order of 100,000 vans through 2030 and plans to sell those vans to other companies over the next few years.

Rivian delivered 24,337 vehicles in 2022 and 57,232 vehicles in 2023. The company increased production as it overcame supply chain bottlenecks and installed its lower-cost, first-party Enduro power unit in more of its vehicles.

But in the first half of 2024, Rivian produced only 23,592 vehicles. For the full year, the company expects production to flatline at about 57,000 vehicles. This decline was primarily due to a planned temporary closure of the Normal, Illinois, plant in April to retool the production line and reduce fixed costs per vehicle, as well as other macroeconomic and competitive headwinds.

Rivian expects its production increases to give it a “modest gross profit” by the fourth quarter of 2024. It also aims to reduce its adjusted EBITDA loss to $2.7 billion in 2024 from $3.98 in 2023, even as its full-year capital spending increases 17% to $1.2 billion. This was the same forecast the company made in its quarterly report in May.

Can Rivian successfully increase its production?

Rivian is still a small outsider compared to Teslawhich produced 1.85 million vehicles in 2023. But it is doing better than smaller EV manufacturers like Clearwhich produced only 8,428 vehicles in 2023.

The bulls believe that Rivian can successfully expand its business, but the bears believe that it will burn too much money before that. The new partnership with Volkswagen should allay some of these concerns.

At the end of June, Rivian entered into a partnership with the German automaker to jointly develop a new architecture and software for electric vehicles in a new joint venture. Volkswagen will invest up to $5 billion in this partnership. Of this, $1 billion will be in Rivian debt convertible into common stock on December 1, two additional tranches of $1 billion in 2025 and 2026, an initial investment of $1 billion in the joint venture and an additional loan of $1 billion to the joint venture in 2026.

Rivian ended the second quarter of 2024 with total liquidity of $9.18 billion, including $7.87 billion in cash, cash equivalents, and short-term investments. That should give the company enough money to launch its new R2 and R3 vehicles over the next three years. Its low debt-to-equity ratio of 0.8 also gives the company some room to take on more debt.

Rivian still seems undervalued

Analysts expect Rivian to grow its revenue 7% this year to $4.77 billion as the company delivers slightly more vehicles to offset its stagnant production rates. But from 2023 to 2026, they forecast the automaker’s revenue to grow at a compound annual growth rate (CAGR) of 29% to $9.61 billion as the company ramps up production and launches new vehicles.

With an enterprise value of $11.26 billion, Rivian trades at just 2.4 times this year’s sales. By comparison, Tesla and Lucid trade at 5.9 and 6.9 times this year’s sales, respectively. As such, Rivian appears undervalued relative to its growth potential – and could still be a great EV bet for patient, long-term investors.