1 Magnificent EV Stock Down 84% to Buy and Hold Forever

Betting on electric vehicle (EV) stocks can be a challenging endeavor. Tesla 's stock price has risen 13,400% since going public. Other EV automakers, meanwhile, have gone bankrupt, with investors losing everything.

There's one EV stock right now that could be the perfect blend of risk and reward. Its shares have lost 84% of their value since debuting in 2021. But if you want to add huge growth potential to your portfolio, this company could be the perfect choice.

This EV stock is cheap for a reason

There's a lot to be skeptical about when it comes to Rivian Automotive (NASDAQ: RIVN) . The biggest challenge is a constant need for new capital. Vehicle manufacturing is notoriously capital intensive. It takes billions of dollars to scale manufacturing capacity, not to mention design, market, and sell whatever is produced. Right now, Rivian is losing $39,000 for every vehicle it makes. Over the past 12 months, it has posted a cumulative loss of $5.5 billion.

Persistent losses have put Rivian in constant fundraising mode. Its share count has increased every quarter since going public. And it has needed to forge alliances with Ford Motor , Amazon , and Volkswagen to supply itself with fresh cash. Looking ahead, Rivian's appetite for new capital likely won't change. The company is currently scaling up production facilities for its R2, R3, and R3X models.

While these vehicles will give it unprecedented access to mass-market sales, this ramp-up process will divert a huge amount of Rivian's dwindling cash reserves. Over the past 12 months, its cash balances have fallen from $11.2 billion to just $7.9 billion. And if Tesla's production difficulties with its Model 3 are any indication, this ramp-up period will take longer and be more costly than management may believe.

Just last month, EV maker Fisker filed for bankruptcy. Its entire asset base will reportedly be liquidated, with equity investors completely wiped out. The fear that Rivian will eventually follow suit is not unfounded. That's partially why shares have struggled since going public. But there are other factors, too, some of which are likely short term in nature. That makes Rivian a compelling turnaround play for risk-tolerant investors looking for maximum growth potential.

RIVN Net Income (TTM) data by YCharts

A great investment for high-growth investors

While Rivian will struggle financially over the short term, there are two reasons to believe the company will survive until its mass-market models hit the streets, an event that should shift its revenue and profitability profile dramatically.

First, management believes the company should be able to achieve positive gross margins by the end of 2024. It will likely still be posting net losses as a whole, but if management is to be believed, the profitability issue should ease over the coming quarters.

Second, Rivian has never had difficulty sourcing deep-pocketed investors. It can always dilute shareholders through the issuance of new stock. But it can also return to previous investors like Ford, Amazon, and Volkswagen for additional funding. Its deal with Volkswagen, for example, already includes provisions for an additional $4 billion in capital.

So there's a good chance that Rivian makes it another few years to see its mass-market vehicles ramp up sales. And there's reason to believe the sales ramp will be impressive. Even with limited models, Rivian has already received a J.D. Power award for most satisfying ownership experience. It was also named one of the most beloved car brands by Consumer Reports, with 86% of owners saying they'd buy another Rivian -- the best rate of any car brand, EV or conventional.

Rivian's weak share price has partially stemmed from lower-than-expected EV sales. But the long-term forecast for EV growth remains robust, with 30% of U.S. vehicle sales expected to be electric by 2030. With Rivian's new models expected to hit the market in 2026 and 2027, they'll soon be met with strong demand tailwinds.

Right now, Rivian is delivering around 14,000 vehicles per quarter. Tesla is delivering around 400,000 vehicles per quarter -- nearly 30 times more than Rivian. If Rivian can bridge the financing gap and get its R2, R3, and R3X models to market, there's a good chance it eventually sells hundreds of thousands of vehicles per quarter. That journey will take time, and there will be plenty of dilution along the way. But Rivian's $16 billion market cap and reasonable 3.1 times sales valuation make it a palatable long-term bet for risk-tolerant investors.

Just know that Rivian's early-stage journey makes it unsuitable for short-term investing horizons. If you want to bet on this stock, you'll need to remain patient, holding for years, if not decades. That turned out to be the best investment strategy for Tesla, and the situation may prove similar for Rivian.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Tesla, and Volkswagen Ag. The Motley Fool has a disclosure policy .