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Buy Rivian Stock Despite New Lows on Earnings?

Rivian stock is trading lower after reporting earnings, but is bouncing off the low. Let's look at how to trade the stock from here.

Rivian  (RIVN) - Get Rivian Automotive, Inc. Class A Report fell Friday after the company reported its first financial results as a public company.

The company reported a worse-than-expected $1.2 billion loss in the third quarter.

On the plus side, the company said consumer pre-orders were now north of 70,000. However, due to supply chain issues, deliveries likely won’t begin until 2023.

The top- and bottom-line whiff are bad enough as growth stocks are getting decimated. However, the massive valuation is a concern too — at least to me.

Shares of Rivian ended the day off $11.17, or 10.3%, at $97.70.

Despite hitting new lows, Rivian commands a market cap north of $85 billion.

I mean seriously, the company is worth more than Ford  (F) - Get Ford Motor Company Report. Not only is it possible that the F-150 Lightning dominates the electric trucking market, but Ford generates impressive business!

Rivian is forecast to generate just ~$71 million in fiscal 2021 and while $3.6 billion in revenue next year would be impressive, it still leaves Rivian stock valued at 24 times 2022 revenue estimates.

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That’s incredibly rich.

Trading Rivian Stock

Daily chart of Rivian stock.

Daily chart of Rivian stock.

Shares bounced hard off the $100 level in early December, but stalled just over $120.

From there, downtrend resistance (blue line) and its short-term moving averages kept a lid on the stock price.

Down in three straight sessions before earnings — including a 5.3% decline on Thursday — the bearish tone was set for Rivian. After the disappointing results, shares gapped down to new lows.

Rivian stock broke below the day-one low at $95.20, although it’s bouncing off the session low at $92.62.

That becomes the line in the sand for bulls to hold. 

On the upside, the bounce back up through $95.20 actually set up a bullish reversal. If it can build above this level, $100 is next, followed by a potential gap-fill up near $107.

On the downside, a break of the low (at $92.62) could put more downside in play. Given the current state of growth stocks, investors need to respect this level and respect the risk that could come with a close below it.