As a company, Rivian Automobile (RIVN -2.79%) has performed incredibly well since its IPO in 2021. During this period, sales have increased by more than 1,000%, crossing the $5 billion mark earlier this year. However, as an investment, Rivian’s journey has been disappointing. The stock price has been falling sharply since its initial public offering (IPO)losing about 15% in the last month alone.

But don’t lose hope just yet. If you’re looking for a stock with truly huge upside potential, this could be your chance. In fact, there’s an important reason why I think Rivian stock is a buy after the recent pullback.

Rivian shares are a bargain for this reason alone

It’s difficult to buy a company when the market decides it’s no longer popular. Instead, it’s much easier to realize that a company is a buy after market sentiment has changed. Electric vehicle (EV) manufacturer Tesla is a perfect example.

Would you have liked to buy stocks in 2020 when they were trading at $35 apiece? Of course you would have. The current stock price is almost $250 per share. But at the time, buying Tesla wasn’t as obvious as you might think. The previous year was difficult for the company, with Tesla’s valuation falling by almost 50% at one point.

Difficulties in scaling its Model 3 sedan later prompted Elon Musk to reveal that the company was only “about a month” away from bankruptcy. Although demand for electric vehicles continues to grow, the category as a whole is still in its infancy, with many uncertainties surrounding long-term demand forecasts.

We all know what happened next. Tesla’s sales soared and its valuation followed. Today, the company is worth more than $800 billion. Patient investors are glad they held on despite years of doubt and volatility. Although it is a difficult act to follow, there is reason to believe Rivien is poised to replicate Tesla’s rise: the promise of consumer vehicles.

In many ways, Rivian is in the same place as Tesla in the past. The company’s sales are now in the billions, with a handful of very expensive luxury models – the R1T and R1S – leading the way. Tesla, of course, is famous for its Roadster, Model vehicles – even though the initial price range was far too high for most consumers.

The main difference between the two companies today is that Tesla owns several mainstream vehicles – like the Model Y and Model 3 – that have helped propel the company from a niche electric vehicle producer to a brand with a presence on almost every road in America. Tesla also has positive gross margins and a healthy, stable cash balance – two things that Rivian sorely lacks.

But it’s their differences that make Rivian stock a bargain today. Rivian shares trade at less than 2 times sales, while Tesla shares trade at almost 10 times sales. The market is right to be skeptical, because electric car space is full of historical failures.

But in two years, everything could change. Indeed, not only does Rivian’s management team expect to achieve positive gross margins, but it also intends to begin deliveries of three new consumer vehicles: the R2, R3 and R3X, all of which are expected to debut for less than $50,000.

The market is right to price Rivian so low right now. But the catalysts that could significantly modify this valuation discount are now established. Investors willing to take a risk today could benefit from substantial upside potential if Rivian achieves its near-term goals of achieving positive targets. gross margins and the launch of its first consumer vehicles.

TSLA Revenue (TTM) data by Y Charts. TTM = last 12 months.

Should we wait until stocks become even cheaper?

Rivian shares are cheaper this month than last month. This has generally been the case for this emerging growth stock. Since its IPO in 2021, Rivian shares have lost nearly 90% of their total value. Ouch.

Rivian’s stock price volatility demonstrates why it’s generally a good idea to use spread of costs in dollars. This strategy essentially involves purchasing a fixed amount of a certain security on a regular schedule – say $100 every two months. This way, you are not betting on a certain price level and your portfolio can benefit from temporary drops in valuation.

Will Rivian imitate Tesla’s incredible rise? The odds are against it, but there are certainly arguments to be made. And the current valuation, less than 2 times sales, is attractive enough to justify a position. Just be sure to expect volatility and be prepared to add to your position during these sudden dips.