Shares of Rivian Automotive (NASDAQ:RIVN) are trading down an additional 14% this morning after falling 15% on Wednesday. The hot electric vehicle (EV) maker is taking a well-needed breather; Rivian stock is still up more than 25% from its IPO closing price on Nov. 10. Concerns of valuation and the ability to scale seem to be haunting Rivian stock today.
Rivian stock isn’t the only EV maker seeing significant declines today. Lucid Group (NASDAQ:LCID) is down 11%, while Canoo (NASDAQ:GOEV) is facing a decline of 13%. It seems investors are selling out ahead of the much anticipated LA Auto Show, which starts this Friday.
What Does Jim Cramer Think of Rivian Stock?
Jim Cramer, Mad Money host for CNBC, had some choice words for investors chasing Rivian stock:
“I can’t blame anyone who wants to find the next Tesla… but I need you to remember the lessons of 1999.”
Cramer is referring to the infamous dot-com bubble crash. From 1995-2000, the Nasdaq index increased by five-fold. Many investors were riding the wave of euphoria on companies with little to no profit. Back then, a company could simply state that they were joining the internet with a “.com” domain and see their stock price rise dramatically as a result.
However, a bubble can’t stay inflated forever. From 2000 to 2002, the Nasdaq index plummeted by 75% from its peak. It then took the Nasdaq 15 long years to regain its highs.
Additionally, Cramer urged investors in speculative EV names that they are “playing momentum, not car companies and not technology, and in that case it’s better to ring the register early and often.”
The Bottom Line on Rivian Stock
Rivian remains a speculative EV play that reported $0 in revenue for the trailing-twelve months (TTM). The company made its first truck deliveries just 2 months ago, and a majority of those orders were sent to Rivian employees. However, it’s still worth noting that Amazon (NASDAQ:AMZN) and Ford (NYSE:F) are major backers of the EV maker, with the former having already placed a preorder for 100,000 vehicles.
Before making an investment in Rivian, investors need to sit down and think about whether Rivian can truly sell enough cars in the future to support its sky-high market capitalization, which currently sits at $110 billion.
On the date of publication, Eddie Pan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
