In 2021, the market was going crazy for electric vehicle (EV) stocks. Several EV makers went public that year with valuations that were through the roof. This exuberance didn’t last for long. In the years that followed, several exciting electric vehicle start-ups saw their stock prices decline by 80% or more.

Today, expectations for most EV makers are in the dumps. And there’s good reason behind the market’s skepticism. But if you’re looking to buy an EV stock with monster potential trading at a sizable discount, this could be your chance.

Why is this monster growth stock trading at a discount?

My favorite EV stock right now is Rivian Automotive (RIVN 1.20%). Shares trade at a big discount despite huge growth potential over the coming years. But if Rivian has such exciting growth prospects, why are shares trading at a discount? Despite the company’s promise, there are some important caveats to get out of the way.

First, the EV industry in general had a difficult year in terms of reality meeting expectations. To be sure, EV demand is still on the rise, and most forecasts call for EVs to represent a greater and greater slice of vehicle sales both domestically and globally in the years to come.

But investing is all about expectations versus reality. And in this department, the numbers haven’t been good in 2024. “The expectation going into this year was that this might be the year EVs really hit that next evolutionary level. And it hasn’t happened,” CarGurus analyst Kevin Roberts recently told the Morning Brew website. 

To be clear, EV sales in the U.S. are still growing. Some quarters in 2024 saw double-digit increases in demand. But these growth rates were below expectations, adding downward pressure to the lofty valuations that some EV makers like Rivian formerly enjoyed.

Second, Rivian is still losing money on every vehicle it sells. Tesla achieved a positive gross margin very early in its history. But despite reaching annual sales of $5 billion earlier this year, Rivian remains in the red. The market will remain skeptical of the company as long as this is the case — a reasonable skepticism considering how many EV makers have gone under over the decades.

Finally, Rivian still only has two models, both of which sell for around $100,000. A recent decline in sales has caused the market to worry whether Rivian will ever be able to tap the mass markets where most of the company’s growth potential lies. Again, this is a reasonable worry. But as we’ll see, there’s light at the end of the tunnel.

RIVN PS Ratio data by YCharts

Two reasons Rivian stock is your best bet for 2025

Even after a disappointing start to the year, EVs still grew their share of the U.S. automotive market in 2024. According to most forecasts, EVs will continue to gain market penetration for decades to come. The questions for Rivian right now are more short-term in focus: Can the company achieve a positive gross margin, and can it find a way to tap the mass market? Luckily, there should be good news on both these fronts fairly soon.

According to Rivian’s management team, the company is expected to achieve positive a gross margin sometime over the next few months. That means during the next quarterly conference call, the market could be getting huge news regarding Rivian’s financial prospects. This optimism may be what was behind Rivian’s recent share price surge, with the company’s valuation rising nearly 40% over a handful of weeks.

On the mass market front, this catalyst will take a bit longer to play out, but it should be worth the wait. Rivian currently has three new mass market vehicles in the works, all of which should sell below the $50,000 mark. When Tesla introduced its Model 3 and Model Y vehicles at a similar price point, sales growth hit a strong inflection point, adding tens of billions of dollars in additional revenue for the company.

Given Rivian’s high levels of customer satisfaction and loyalty, I’m betting these new vehicles will wow the market. When that happens, expect the valuation to soar.

Right now, Rivian is stuck in a tough spot. Shares may react to achieving a positive gross profit, but the company’s mass market vehicles aren’t expected to arrive until 2026. Expect a lot of volatility until then, providing plenty of opportunities to double down at even cheaper prices.