I wrote recently that Rivian (NASDAQ: RIVN) investors should pay particularly close attention to the company’s gross margins. With stalling revenue growth, Rivian needs to prove that it can at least turn a profit on every vehicle it sells. If gross margins turn positive, that should buy it enough time to launch its mass market vehicles in 2026.
When Rivian reports its quarterly earnings later this month, we’ll have a good idea of where gross margins are headed. That’s because management has reiterated its goal of reaching positive gross margins by the end of the just completed quarter. Once that news comes out, there’s one other number I’ll be keeping my eye on.
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Gross margins are important for Rivian’s near-term financial survival. But long term, there’s only one number that will matter: sales growth. Right now, on a price-to-sales basis, Rivian trades at a deep discount versus its electric vehicle peers. That includes its biggest competitor, Tesla, but also smaller competitors like Lucid Motors. If sales growth returns to former levels, expect Rivian’s valuation discount to narrow quickly, adding a huge upside to its stock price potential.
Data by YCharts.
Will Rivian be able to bring its sales growth back into the double digits? Perhaps; this is why gross margins also matter so much. In 2026, Rivian expects to launch three new mass market vehicles, all priced below $50,000. This moment should be a huge inflection point, allowing the company to grow bigger than ever before. Tesla achieved a similar sales growth revival upon the release of its mass market vehicles.
Rivian simply needs to buy time until those vehicles launch, and achieving positive gross margins would go a long way in earning the market’s trust. Then it’s back to monitoring Rivian’s most important metric long term: top-line sales growth.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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