Nio (NYSE: NIO) stock price has come under intense pressure this month even after the company published encouraging financial results and May delivery numbers. It sunk to a low of $4.30, its lowest point since April 26th.
A bargain or a value trap?
Nio, like other Chinese EV companies, has struggled hard in the past few years as concerns about the industry remained. Its stock has tumbled by more than 93% from its all-time high while its market cap has crashed from over $84 billion to the current $8.9 billion.
Nio is facing numerous internal and external factors. Internally, there are signs that the company’s finances are not doing well. In its most recent financial results, Nio said that its vehicle sales dropped by 9.1% to $1.1 billion. Total revenue retreated to $1.37 billion.
The company is also having challenges hitting its vehicle manufacturing target. It sold 30,000 vehicles in the last quarter, down from the guided 33,000. Also, it is still making substantial losses. Its net loss in the last quarter stood at over $718 million.
Externally, Nio is operating in a highly competitive market, with companies like XPeng, BYD, Tesla, and Huawei giving it the most competition. Other international brands like VinFast and Ola Electric are giving it substantial competition.
There are signs that the Chinese EV industry is not growing as it used to before as the market has become highly saturated. Nio is also contending with protectionism in the United States and Europe, which have unveiled 100% and 25% tariffs on Chinese EV companies.
Still, Nio has insisted that it is well-positioned to continuing its growth by launching new models and accelerating deliveries. For example, while it delivered 30,000 in Q1, it delivered 20,544 vehicles in May alone. It also expects to accelerate vehicle production this year.
Therefore, the question is whether Nio is currently a bargain or a value trap. Proponents argue that it is a well-known brand with a solid balance sheet as it has over $6.3 billion in cash and short-term investments. They also note that the sentiment has been highly negative on the company.
Data shows that the stock has a bullish rating among analysts. It has a buy rating with a target of $8.48, which is much higher than the current $4.30.
On the other hand, critics argue that Nio is still overvalued and faces numerous challenges as competition and margin issues remain.
Nio stock price forecast
Turning to the weekly chart, we see that the Nio share price has been under pressure for a long time. It has remained below the 50-week and 100-week moving averages (EMA).
On the positive side, there are signs that the stock has formed a falling wedge pattern, which is a popular bullish sign. This pattern is nearing the confluence level, which is a positive sign.
Therefore, while Nio stock is risky, there is a likelihood that it will have a bullish breakout in the coming weeks. If this happens, the next point to watch will be at $6.
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