Nio (NIO) targets a booming market for electric cars. Chinese EV startup is bringing new electric vehicles to market while battling Covid and radiation concerns. Is Nio stock a buy right now?
Founded in 2014, Nio knew little about vehicle manufacturing when it first burst onto the scene. But Nio, sometimes called the Tesla of China because of its luxury designs, continued to generate booming sales.
Contrary to You’re here (TSLA), Nio does not manufacture its own electric cars, but partners with a public automaker.
Nio, Xpeng (XPEV) and Li-Auto (LI) are rival startups to Tesla in China, the world’s largest market for electric vehicles. The Chinese electric vehicle giant BYD (BYDDF) also became a fierce competitor to Tesla.
Latest news from Nio
On May 4, the Securities and Exchange Commission added Nio and Xpeng to a provisional list of foreign companies that could be delisted if they do not open their books to US regulators. Shares of Nio and Xpeng both plunged on May 5.
four days earlier, Nio announced that April electric vehicle sales were down 49% from Marchin the midst of lockdowns.
In April, Nio halted production as a resurgence of Covid-19 in China hit its supply chain. Measures taken by China to contain the spread of the coronavirus include strict lockdowns.
In March, Nio began delivering a new electric vehicle and donated a report on mixed earnings for the last quarter of 2021.
Nio Results and Fundamental Analysis
On key earnings and other fundamental metrics, Nio lags. It is a young and growing company, always looking to make a profit.
Nio stock gains a low EPS Ranking of 28 out of 99. The EPS score compares a company’s earnings growth relative to other companies.
Nio holds a SMR Ranking of C, on a scale of A to worst E. The SMR rating is a combined measure of sales growth, profit margins and return on equity.
On March 25, Nio delivered a worse than feared loss for the fourth quarter of 2021. For the full year, Nio cut losses to 30 cents per ADR while revenue jumped 126%, despite production shutdowns due to chip shortages.
Analysts expect Nio to widen losses to 53 cents per share in 2022, according to FactSet. Revenues are expected to jump 68% for the year. They forecast Nio to sharply reduce losses to 13 cents per share in 2023 as revenues grow 70%.
In 2021, Nio more than doubled its electric vehicle sales, despite pandemic-related challenges. Sales headwinds have increased in 2022, but Wall Street still sees Nio as a promising EV stock.
Of 29 analysts covering Nio stock, 27 rate it a buy, two have a hold and no one has a sell, says FactSet.
Nio Stock Technical Analysis
U.S.-listed Nio shares remain below a falling 10-week moving average. On May 5, Nio stock plunged 15% to 15.40, its lowest level since mid-March, on delisting fears. NIO is now 72% off the 52-week high.
The once white-hot stock of electric vehicles sits even further below historic highs. Shares of Nio and China as a whole fell on delisting fears. Concerns about supply chains, inflation and rate hikes largely affected growth stocks.
the relative force line for Nio’s stock shows a significant lag. It has rebounded strongly for most of 2020. A rising RS line means a stock is outperforming the S&P 500 index. It is the blue line in the chart shown.
Stocks earn poor IBD composite score of 23 out of 99. The rating combines the main fundamental and technical metrics in a single partition. A 11 RS Ranking means that Nio has only outperformed 11% of all stocks over the past year.
Nios Capitalization/Distribution Rating of C reflects roughly equal buying and selling by large investors over the past 13 weeks. In March, 961 funds held shares. NIO stock shows zero quarter increase in fund ownership, according to the IBD Inventory Checker Tool.
Electric vehicle competition in China is growing
Nio is targeting the Chinese luxury market for SUVs and electric cars.
By 2030, electric vehicles will account for 90% of new car sales in China, Forecast by Nio CEO William Li.
Amid fierce competition, Nio plans to launch three new electric vehicles in 2022. It has started deliveries of the ET7its first electric sedan on March 28. Nio plans to launch ET5 in September and the ES7, a five-seat electric SUV, before the end of the year.
Nio CEO William Li sees the ET7 as a Tesla Model S rival. He expects the smaller and more affordable ET5, a supposed Model 3 rival, to expand Nio’s customer base .
Nio also sells three high-end electric SUVs: the ES8, ES6 and EC6.
While increasing its capacity in China, Nio is expanding overseas. It already sells electric vehicles in Norway and aims to be present in 25 countries by 2025.
BYD and Xpeng are also in Norway, with Li Auto also planning to enter Europe. Chinese electric vehicle makers are challenging Western automakers, including Tesla, on the mainland.
Outlook for Nio and EV shares
At home, the Chinese Nio, Li Auto and Xpeng are developing to repel Tesla.
Led by China, global electric vehicle sales more than doubled in 2021 from a year earlier, according to the International Energy Agency (IEA). But for this torrid sales growth to continue into 2022 and beyond, “battery supply chains and electric vehicle production capacity will need to expand at a rapid pace,” the IEA said.
However, Nio and its peers face a protracted semiconductor shortage and emerging battery shortages.
Nio offers an innovative battery subscription plan. Basically, Nio sells the car and the battery separately. Users can buy Nio electric vehicles without batteries at a lower price and “rent” batteries for a monthly fee. They can also swap car batteries according to their needs.
Nio has 884 battery swap stations in China and more than 5 million battery swaps. It brought battery swaps to Norway, further challenging Tesla in that market.
Is Nio Stock A Buy Now?
From a fundamental perspective, Nio’s financial situation is improving after debt and liquidity fears sent shares tumbling. It cut losses while delivering huge revenue gains and improving EV margins.
New electric cars, entry into Europe and battery innovations mean more avenues for growth. But the EV wars are heating up. As the pandemic drags on, the chip supply crisis poses a headwind for Nio. Longer term, battery supplies could be an issue biggest headache for electric vehicle stocks to the big one.
Delisting fears slam Nio’s stock again. The once-hot Chinese stock still has a lot of recovery work to do. There remains a promising and fast-growing stock of electric vehicles, so check back for updates.
Bottom line: Nio stock is not a buy right now.
YOU MIGHT ALSO LIKE: