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Why Rivian Stock Stalled Today

What happened

Rivian Automotive (NASDAQ:RIVN) shares stumbled in early trading Friday, falling more than 7% before recovering and retracing to just a 3.2% loss as of 10:30 a.m. ET.

For at least a few reasons, Tesla (NASDAQ:TSLA) may be to blame.

Rivian R1T electric pickup in the snow.

Image source: Rivian.

So what

As you’ve probably heard by now, on Wednesday evening, electric vehicle (EV) kingpin Tesla reported terrific results for its fiscal fourth quarter of 2021. Sales climbed 65% year over year, profits were well ahead of estimates, and Tesla’s profit margins surged across the board. At the same time, however, Tesla warned of “equipment capacity, operational efficiency and … supply chain” difficulties that were impacting its business and “likely to continue through 2022” — all factors that could limit Rivian’s rise as it attempts to build a successful electric truck business and challenge Tesla’s electric dominance.

If Tesla is snapping up all the EV demand, though, there may be less demand remaining for Rivian to satisfy in the future, making it more urgent than ever that Rivian grow its business to scale — quickly. At the same time, however, if Tesla’s supply chain difficulties apply equally to Rivian, then this may make growing the business more difficult for Rivian.

And now, the final bit of bad news: As electric car stocks went on sale this week, with Tesla tumbling 11%, Rivian sliding 17%, and Lucid Group crashing for a 27% burn, famed growth investor Cathie Wood stepped up to buy Tesla stock twice for her ARK tech funds — but didn’t buy a single share of Rivian (or Lucid, either).  

Now what

Now, the good news is that Rivian is rising to the challenge — Wood’s lack of interest notwithstanding.

This week, Bloomberg reported that Rivian is ramping up electric truck production to 200 units per week — 10,000 units per year — and plans to deliver 10,000 electric delivery vans to Amazon this year as well. My colleague John Rosevear also had some kind words for Rivian this week, pooh-poohing worries over “Rivian’s fundamentals or investment case” and calling the company a “well-managed automaker with a good chance of building a sustainable EV business.”

After initially crashing early this morning, Rivian stock seems to be rebounding now — and maybe that’s the right call.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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