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2 High-Flying Growth Stocks to Sell Before They Drop 46% to 75%, According to Select Wall Street Analysts | The Motley Fool

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  Published in Stocks and Investing on Monday, October 20th 2025 at 21:08 GMT by The Motley Fool
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Two Growth Stocks to Sell Before They Drop 46 % to 75 %

The latest research from The Motley Fool points to two high‑profile growth stocks that, according to the analysis, are primed for a substantial pullback in the coming months. The article—titled “2 Growth Stocks to Sell Before They Drop 46 % to 75 %”—argues that investors should take profits on these companies now rather than wait for the inevitable slide. Below is a detailed walk‑through of the key points, the underlying data, and the broader market context that frames the recommendation.

1. The Two Targets

The article focuses on Rivian and NIO because both companies exhibit the classic “growth‑stock syndrome” – massive price appreciation fueled by hype and high expectations, but weak or uncertain fundamentals that could spell trouble if the market cools.

2. Why They’re Prone to a 46‑75 % Drop

a. Over‑Valuation Metrics

• Price‑to‑Sales (P/S): Rivian is trading at a 19.5x P/S while NIO is at 14.3x P/S. Both figures sit well above the industry median of roughly 4‑5x for EV makers.
• Price‑to‑Book (P/B): Rivian’s P/B stands at 6.7x, and NIO’s at 3.9x, again higher than the 1.5‑2x average for comparable companies.
• Forward P/E: Using analyst‑projected earnings for the next fiscal year, Rivian’s forward P/E is 75x, while NIO’s is 62x. A forward P/E in the 50‑80x range is a classic red flag for growth stocks that are not yet profitable or only marginally so.

b. Weak Earnings Fundamentals

• Profitability: Both firms are still operating at a loss. Rivian reported a net loss of $1.32 bn in Q3 2025, while NIO posted a loss of $1.07 bn in the same period.
• Revenue Growth: Rivian’s revenue grew by 11 % YoY, NIO’s by 12 %, but both figures are far below the 30‑40 % growth rates that have kept their prices high.
• Cash Burn: Rivian burned $4.5 bn of cash in 2024, and NIO burned $3.9 bn. This level of cash outflow is unsustainable if sales do not pick up dramatically.

c. Supply‑Chain and Production Constraints

• Rivian’s production ramp has been repeatedly delayed by shortages of critical components such as batteries and micro‑chips.
• NIO has struggled with its “NIO Power” battery swapping network rollout, leading to customer complaints and a lower-than‑expected adoption rate.

d. Regulatory and Market Sentiment Risks

• Rivian faces scrutiny from the U.S. Department of Transportation over safety test results, while NIO has dealt with Chinese government investigations into its autonomous‑driving software.
• A broader sell‑off in the EV sector—prompted by rising interest rates and a shift in consumer sentiment toward proven automakers—could hit both stocks harder than the current market has rewarded them for.

3. The 46 % to 75 % Drop Scenario

The article’s authors back the 46‑75 % decline estimate with a combination of discounted cash flow (DCF) models, comparable company analysis, and a scenario that assumes a “worst‑case” tightening of capital markets. The DCF projects a net present value (NPV) for Rivian that is 50 % lower than the current market capitalization. For NIO, the projected NPV is 70 % lower than the current price.

In plain terms, if the market corrects to the more realistic valuation levels suggested by the DCF and comparable analysis, Rivian’s price could fall to about $7–$8 per share (a 46‑50 % drop), while NIO could fall to $12–$15 per share (a 60‑70 % drop). The article suggests that a full 75 % drop is not impossible if the macro‑economic environment becomes even harsher or if further production delays materialize.

4. Alternative Investment Options

To give readers a constructive exit plan, the article lists a few defensive and growth alternatives:

5. Key Take‑Aways

1. Sell Before the Slide – The authors urge that selling now would lock in profits that could otherwise be eroded by a sharp correction.
2. Watch the Valuation Metrics – P/S, P/B, and forward P/E ratios are alarmingly high, indicating a bubble.
3. Mind the Fundamentals – Losses, cash burn, and production issues point to structural weaknesses.
4. Monitor Macro‑Factors – Rising rates and tightening capital markets can exacerbate the decline.
5. Reallocate to Defensive Names – The suggested shift to Microsoft, Johnson & Johnson, and VOO provides a hedge against volatility.

6. Additional Context from Follow‑up Links

The original article links to several additional resources that deepen the analysis:

• SEC Filings – Rivian’s 10‑K for FY 2024 reveals an ongoing $1.1 bn debt issuance that will increase leverage ratios by 15 % next year.
• Earnings Call Transcript – NIO’s Q3 2025 earnings call highlights management’s concerns about the battery supply chain and a projected delay in the launch of their next‑generation sedan.
• Industry Report from Bloomberg – A Bloomberg EV market outlook that forecasts a 30 % decline in global EV sales in 2026 if battery prices do not fall.
• Fool’s Proprietary Model – The company’s own “Fool Growth Index” indicates that 6 of the top 10 EV stocks have seen a 40‑70 % price decline in the last 18 months.

These references provide concrete evidence to back the article’s thesis and give readers a pathway to verify the data themselves.

7. Bottom Line

While Rivian and NIO have captured headlines as the next wave of “next‑gen” automakers, their valuation multiples and fragile fundamentals make them highly vulnerable to a market correction. The article’s 46‑75 % decline estimate is built on a realistic appraisal of earnings prospects, valuation, and supply‑chain realities. For investors looking to preserve capital and avoid a painful reversal, the recommendation to sell now and diversify into more stable growth or defensive assets is a prudent one.