Rivian (NASDAQ: RIVN) stock is finding the opposite of what was set up to be a slightly quiet year for the automaker, which is in between vehicle launches. Rivian is dealing with tariff uncertainty, trying to boost deliveries, and constructing the expansion to its Illinois plant to enable production of its all-new R2 SUV. Despite trading well below all-time highs, the stock is quietly up 56% over the past year, but if you need more reason for optimism amid a slowing EV market, here are two.
Operational improvement
Rivian churned out its first quarter of gross profit during the fourth quarter of 2024, and it expects to generate a modest gross profit for the full-year 2025 period. That said, it still surpassed expectations when it posted a gross profit of $206 million during Q1, compared to $527 million during the prior year.
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Both automotive and software and services divisions contributed to gross profit. Automotive gross profit checked in at $92 million while software and services checked in at $114 million. Rivian also posted an 85% improvement in cash flow from operating activities during Q1, compared to the prior year.
Not only was this is a huge step for Rivian in proving its vision to profitability, it also unlocks a $1 billion payment from Volkswagen Group due to reaching a milestone of two consecutive quarters of gross profit.
Furthermore, this is an impressive result because the company’s deliveries have slipped, forcing the gross profit improvement to come from minimizing cost of goods sold. Rivian did exactly this, removing over $22,600 in automotive cost of goods sold per vehicle delivered during Q1, compared to the prior year. This makes five consecutive quarters of improving gross margin, as you can see in the graphic below
Data source: Rivian SEC filings. Graphic source: Author.
Generating demand
So far, Rivian has mostly relied on word-of-mouth for its marketing, and while its user base is small, it’s very passionate.
Rivian is trying to tap into the intense passion of its user base with its newest and first major marketing campaign. It will develop commercial advertisements based on real user stories. The advertising media plan will include spots on streaming services, social media, and possible buys on broadcast TV per Rivian’s vice president of marketing, Denise Cherry.
In addition to its commercial campaign, the company is focused on building brand awareness and customer experience through its demo drives. In fact, management believes the best way to drive demand is to have consumers experience Rivian products, and the company provided over 36,000 demo drives in Q1, more than any quarter to date.
Ramping up its demo drives and marketing campaign on the eve of the R2 launch early next year could result in the most demand Rivian has seen in its young lifetime.
Rivian R1T. Source: Rivian.
What it all means
The expected funding from Volkswagen in addition to Rivian’s $7.2 billion of cash and cash equivalents is forecast to fund Rivian’s operations through the ramp of R2 at its Illinois plant, as well as the R2 and R3 in Georgia. The R2 and R3 will enable the company to build scale, open the doors to a more mainstream and price-conscious consumer, and provide a path to positive free cash flow.
While the company is highly speculative and burning cash at a rapid rate, the company is positioning itself for a strong 2026. The recent profitability streak and ad push are just two more reasons to be optimistic about buying Rivian ahead of time.
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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.
