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Rivian Stock Got Cheaper Today -- Is It a Buy?

By Rich Smith – Updated Jan 5, 2022 at 2:49PM

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Even if you assume Rivian will grow, it still looks pretty pricy.

Electric truck start-up Rivian (RIVN 3.16%) enjoyed an explosive initial public offering (IPO) late last year, more than doubling its price in its first week as a public company. Sadly, Rivian stock is moving in the opposite direction today. As of 1:20 p.m. ET, shares of Rivian have lost 8.9% of their value, pushing the stock's total losses since the start of this still very young year past 10%.

That sounds like bad news -- but might it actually be a buying opportunity for new investors?

Rivian R1T electric truck.

Image source: Rivian.

At least one analyst thinks so. In a note out last night, investment bank Mizuho Securities argued that Rivian stock was a buy even before this morning's sell-off.

"We see RIVN as a pure play and strong early mover in the EV market with a focus on the higher-growth SUV and light truck market and a strong commercial vehicle roadmap beginning with Amazon," argued the analyst. On the one hand, true, Rivian is a company with no profits and essentially no revenue at present. But it's also a company with potential to grow.

At last report, Rivian had in hand some 71,000 preorders for its R1T electric trucks and R1S electric SUVs -- and orders for 100,000 new electric delivery vans from Amazon as well. Further burnishing its growth stock credentials, Mizuho argues that Rivian could grow into a 102,000-truck-a-year company by as early as next year, and one day produce as many as 600,000 trucks per year, with implied annual revenue approaching $54 billion.

On the other hand, Rivian stock already carries a market capitalization of more than $100 billion -- without revenue -- today. Even assuming the company does one day reach $54 billion in annual revenue, that works out to a price-to-sales ratio of two times the company's still-hypothetical future sales.

Is that a lot, though, or a little?

Well for comparison, established, profitable automakers like Ford Motor Company and General Motors sell for P/S ratios of just 0.6 and 0.7 times sales, respectively. This means that investors today are valuing Rivian as if it were roughly three times more valuable than car companies that have already figured out how to earn a profit.

Suffice it to say that seems a bit optimistic. Seems to me, the investors who are selling Rivian today -- not buying -- are making the better bet.

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. 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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