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Is Rivian Stock the Easiest Short of the Decade?

By Neil Rozenbaum – Nov 18, 2021 at 7:00AM

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At its current valuation, the car manufacturer looks like a Michael Burry short target.

In this video, I will be talking about Rivian (RIVN -1.53%) and why I think it's the easiest short of the decade. I do believe in the company's success in the long term, but its valuation currently does not reflect reality. Not even close. You can find the video below but here are some highlights.

  • The company is currently valued at a $130 billion market cap, making it the fourth-largest auto manufacturer in the world with virtually no sales. Don't get me wrong, I think Rivian will be a success in the long term, but right now this makes no sense at all.
  • The Amazon relationship might raise some questions. It's currently Rivian's largest customer and investor with a 20% stake worth around $25 billion and a pre-order of 100,000 delivery vans worth $7 billion. Amazon could sell its stake completely and pocket $18 billion in profits and still get 100,000 vans.
  • Rivian expects to deliver the 100,000 electric delivery vans by 2025, which means it needs to produce at least 25,000 vans a year. That shouldn't be an issue because Rivian said that with its current capacity it is able to produce 85,000 vans annually. Which raises more questions.
  • It expects to fill the current pre-order backlog of 55,400 R1 vehicles by the end of 2023, so 26 months from now. This means that it expects to make 2,130 R1 vehicles per month. That's 25,569 per year, or 40,000 less than what Rivian wrote in the S-1.
  • If the current installed capacity really is 65,000 for the R1, then by the end of 2023, 26 months from now, Rivian should have produced 140,833 R1 vehicles.
  • At the end of October, it did produce 104 R1T vehicles, and if that stays the same it will bring the yearly production to 5,408 vehicles. 

Now, do take into account that production does improve over time. But the current numbers that Rivian provided in the S-1 filing do not reflect reality. If it somehow does manage to produce 150,000 vehicles per year, something that Tesla was only able to do in 2018 after already producing the Model S for seven years, then that would be a great achievement. 

For the full insights, watch the video below and consider subscribing. 

*Stock prices used were the closing prices of Nov. 16, 2021. The video was published on Nov. 17, 2021.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Neil Rozenbaum owns shares of Amazon and Tesla. The Motley Fool owns shares of and recommends Amazon and Tesla. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policyNeil is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

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