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Why Rivian Stock Dropped Today

By Rich Smith – Dec 28, 2021 at 1:47PM

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The EV maker's future looks foggy.

What happened

Shares of electric truck start-up Rivian (RIVN -0.66%) succumbed to a sell-off Tuesday morning, giving back about half of their gains from yesterday and falling back 4.2% as of 11:40 a.m. ET.

So what

Rivian stock appears to be suffering some unintended consequences from online joshing this morning. In an interview on Yahoo! Finance Live, editor Brian Sozzi joked that he's only seen Rivian vehicles in YouTube videos so far, and "that's about it." Sozzi also said that it's unlikely anyone will see any Rivian trucks "anytime soon" because the company "will not be able to meet their delivery targets" in 2021.  

The Yahoo! editor expressed skepticism -- and indeed, amazement -- at Rivian's $95 billion market cap despite the company's deep losses and negative forecast for deliveries, ascribing the stock's strong performance earlier this year to mere "optimism."

White arrow declining sharply atop a stock tickertape display bathed in red.

Image source: Getty Images.

Now what

But is there anything behind Rivian aside from optimism? As my fellow Motley Fool Joe Tenebruso pointed out yesterday, there is: specifically, 71,000 pre-orders for Rivian R1T pickup trucks (worth at least $4.8 billion at list prices); and 100,000 orders for electric delivery vans for Amazon, worth another $5.3 billion in sales if Motor Trend is right about its price estimate.    

Granted, at $95 billion in market cap, that $10.1 billion in future sales works out to only about a 9.5 times sales valuation on Rivian stock versus Tesla's nearly 25 multiple. But that's only assuming Rivian can produce all 171,000 of these vehicles in a single year and keep on producing similar numbers of electric trucks year after year thereafter.

With Rivian cutting delivery estimates, rather than raising them, it remains to be seen whether it can produce anywhere near the number of trucks as its valuation is based on.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns 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 policy.

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