New (NIO) targets a booming electric vehicle market. The Chinese EV startup is working to bring new electric cars to market as it battles Covid problems and is crossed off the list. Is Nio Stock Buy Now?
Founded in 2014, Nio didn’t know much about car manufacturing when it came on the scene. But Nio, sometimes called the Tesla of China because of its fancy designs, continued to have booming sales.
unlike Tesla (TSLA), Nio does not make its own electric vehicles, and instead partners with a state-owned automaker.
new, Exping (XPEV) and Lee Otto (LI) rivals Tesla in China, the world’s largest electric vehicle market. Chinese car giant BYD (BYDDF) has also emerged as a fierce competitor to Tesla.
New . latest news
On May 4, the Securities and Exchange Commission added Nio and Xpeng to a provisional list of foreign companies that face delisting if they do not open their books to US regulators. Nio and Xpeng shares both fell on May 5.
Four days ago, Nio reported that sales of electric vehicles in April were down 49% from March, amid the shutdowns.
In April, Nio halted production as the resurgence of Covid-19 in China resurfaced in its supply chain. China’s measures to contain the spread of the coronavirus include strict lockdowns.
In March, Nio began introducing a new electric car and delivered a mixed report on earnings for the fourth quarter of 2021.
Neo earnings and fundamental analysis
In terms of key earnings and other fundamental metrics, Nio is lagging. It is a young and fast growing company, still looking to turn a profit.
Nio stock earns a poor EPS rating of 28 out of 99. The EPS rating compares the company’s earnings growth versus other companies.
Nio holds an SMR rating of C, on a scale of A to E worst. The SMR rating is a common measure of sales growth, profit margins and return on equity.
On March 25, Nio posted a worse-than-expected loss for the fourth quarter of 2021. For the full year, Nio trimmed its losses to 30 cents per ADR while revenue jumped 126%, despite shutting down production due to a chip shortage.
Analysts expect Nio to extend its losses to 53 cents a share in 2022, according to FactSet. Revenue is expected to rise 68% for the year. They predicted Nio’s losses would drop sharply to 13 cents a share in 2023 as revenue grows 70%.
In 2021, Nio will more than double sales of electric cars, despite challenges associated with the pandemic. Sales headwinds grew in 2022, but Wall Street still saw Nio as a promising EV stock.
FactSet says that of 29 analysts covering Nio’s stock, 27 have rated it a buy, two have a hold and none have a sell.
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Nio Stock Technical Analysis
US-listed Nio stocks are still below their 10-week moving average. On May 5, Nio’s stock fell 15% to 15.40, its lowest level since mid-March, due to the removal of concerns. NIO is now 72% off the 52-week high.
The once-hot EV stock is below all-time highs. Nio and China stocks generally fell on delisting fears. Concerns about supply chains, inflation and interest rate increases weighed on growth stocks in general.
Nio stock’s relative strength line is showing a severe lag. It has risen sharply for most of 2020. The higher RS line means that the stock is outperforming the S&P 500. It is the blue line in the chart shown.
The stock has a poor IBD composite rating of 23 out of 99. The rating combines key fundamental and technical metrics into one score. An 11 RS rating means Nio has outperformed just 11% of all stocks over the past year.
Nio’s Accumulation/Distribution of C rating reflects nearly equal buying and selling by major investors over the past 13 weeks. As of March, 961 funds own shares. NIO stock shows zero quarters of increased money ownership, according to the IBD Stock Screener Tool.
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Increasing competition in China EV
Nio is targeting China’s luxury SUV and electric vehicle market.
Giant Chinese and American automakers are rushing into this market. general motors (GM), stronghold (f) and Volkswagen (VWAGY) all sell premium electric SUV made in China to Chinese consumers.
By 2030, electric vehicles will make up 90% of new car sales in China, Nio CEO William Li forecasts.
Amidst stiff competition, Nio expects to launch three new electric vehicles in 2022. Deliveries of the ET7, the first electric sedan, began on March 28. Nio plans to launch the ET5 in September and the ES7, a five-seater electric SUV, before the end of the year.
Nio CEO William Li sees the ET7 as a competitor to the Tesla Model S. The smaller and more expensive ET5, a purported competitor to the Model 3, expects to grow Nio’s customer base.
Nio also sells three luxury electric SUVs: the ES8, ES6, and EC6.
While expanding capacity in China, Nio is growing overseas. It already sells electric vehicles in Norway and aims to be in 25 countries by 2025.
BYD and Xpeng are in Norway as well, and Li Auto is also planning to enter Europe. Chinese electric car makers are challenging Western automakers, including Tesla, on the continent.
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Nio and EV stock overview
Back home, Nio, Li Auto and Xpeng are expanding into China to fend off Tesla.
Led by China, global electric vehicle sales more than doubled in 2021 compared to the previous year, according to the International Energy Agency (IEA). But for this significant sales growth to continue into 2022 and beyond, “battery supply chains and production capacity for electric vehicles must expand at a rapid rate,” the IEA said.
However, Nio and its peers are facing longstanding semiconductor shortages and an emerging battery shortage.
Nio offers an innovative subscription plan for batteries. Basically, Nio sells the car and battery separately. Users can purchase Nio EVs without batteries at a lower price and “rent” the batteries for a monthly fee. They can also replace car batteries based on their needs.
Nio boasts of 884 battery replacement stations in China and more than 5 million battery replacements. The battery swap has moved to Norway, adding to Tesla’s challenge in this market.
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Is Nio Stock Buy Now?
From a fundamental perspective, Nio’s financial position is improving after debt and liquidity concerns slammed the stock. It trimmed losses with huge revenue gains and improved margins for electric vehicles.
New electric cars, entry into Europe and battery innovations mean more runway for growth. But the electric car wars are raging. As the pandemic continues, the chip supply crunch is creating headwinds for Nio. In the long run, battery supplies could be an even bigger nuisance to EV stocks in general.
Delisting fears are hitting Nio stock again. There is still a lot of recovery work to be done on the once hot Chinese stock exchange. The stock for electric vehicles remains promising and high-growth, so check back for updates.
Bottom line: Nio’s stock is not a buy at the moment.
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