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3 Reasons RIVN is Risky and 1 Stock to Buy Instead

By: StockStory

September 25, 2025 at 00:02 AM EDT

RIVN Cover Image

Over the past six months, Rivian has been a great trade, beating the S&P 500 by 12.9%. Its stock price has climbed to $15.80, representing a healthy 27.8% increase. This performance may have investors wondering how to approach the situation.

Is now the time to buy Rivian, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Rivian Not Exciting?

We’re glad investors have benefited from the price increase, but we're swiping left on Rivian for now. Here are three reasons why RIVN doesn't excite us and a stock we'd rather own.

1. Low Gross Margin Reveals Weak Structural Profitability

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

Rivian has bad unit economics for an industrials business, signaling it operates in a competitive market. This is also because it’s an automobile manufacturer.

Automobile manufacturers have structurally lower profitability as they often break even on the initial sale of vehicles and instead make money on parts and servicing, which come many years later - this explains why new entrants whose fleets are too young to generate substantial aftermarket revenues have negative gross margins. As you can see below, these dynamics culminated in an average negative 49.3% gross margin for Rivian over the last four years.

2. Cash Burn Ignites Concerns

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Rivian’s demanding reinvestments have drained its resources over the last four years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 138%, meaning it lit $137.54 of cash on fire for every $100 in revenue.

Rivian Trailing 12-Month Free Cash Flow Margin

3. Short Cash Runway Exposes Shareholders to Potential Dilution

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Rivian burned through $1.22 billion of cash over the last year. With $7.51 billion of cash on its balance sheet, the company has around 74 months of runway left (assuming its $6.34 billion of debt isn’t due right away).

Unless the Rivian’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Rivian until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

Final Judgment

Rivian isn’t a terrible business, but it isn’t one of our picks. With its shares outperforming the market lately, the stock trades at $15.80 per share (or a forward price-to-sales ratio of 3.2×). The market typically values companies like Rivian based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

Stocks We Would Buy Instead of Rivian

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

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