Nio (NYSE: NIO) stock price has crashed hard after peaking at almost $67 in 2021. It has plunged by over 51% this year, bringing its valuation to over $8.6 billion. Also, the stock has melted by more than 55% in the past 12 months.
The EV industry woes
Nio’s downfall has happened in sync with other EV companies, which have pulled back sharply in the past few years. Tesla, the best-known EV brand in the world, has also dropped by over 50% from its all-time high. Other American EV companies like Lucid Group and Rivian have tumbled while Fisker filed bankruptcy in May.
Nio’s stock crash has also coincided with the dive of other Chinese companies. Li Auto’s stock has nosedived by 47% in the past 12 months while XPeng has dropped by more than 44% in this period. Polestar, which is mostly owned by Volvo, has also crashed by 76% in the past 12 months.
This price action happened as concerns about the EV industry continued. Investors are concerned about the rising competition and the market saturation in key markets like China and in the United States. This competition has led to thinner margins by most brands.
Meanwhile, investors believe that Nio’s global expansion plans could find severe regulation issues. Joe Biden has already implemented a 100% tariff on Chinese EV companies while Europe will impose a 25% tariff.
Most Chinese companies can handle these tariffs because of their low cost of manufacturing in the country. What is unclear, however, is whether there is strong demand for Chinese EVs in key markets like the US and in Europe.
Deliveries are still robust
Despite these challenges, Nio’s business is doing well, as evidenced by its monthly and quarterly delivery figures.
The company delivered 21,209 in June, a 98% increase from the same period in 2023. It delivered 57,373 in the second quarter, a 143% YoY increase, making it one of the fastest-growing companies in the EV industry. It has now delivered 537,020 vehicles since inception.
These numbers mean that there is still strong demand for the company’s vehicles even as growth concerns continue. They also mean that EV sales are doing well in China, a country that has been slowing in the past few months.
The most recent results showed that the company’s total sales came in at $1.32 billion in the first quarter while its net loss stood at over $968 million. Nio has committed to reduce its costs, including by announcing two layoffs.
I believe that its strong balance sheet means that it will not need to raise cash any time soon. It ended the quarter with over $3.29 billion in cash and equivalents, $2 billion in short-term investments, $469 million in trade and notes receivables, and $673 million in restricted cash.
Nio stock price analysis
In my last article on Nio stock, I noted that it could bounce back later this year after it formed a falling wedge chart pattern.
On the weekly chart above, we see that the wedge is still forming and is nearing its confluence level, which is a positive sign. The stock remains slightly below the 50-week and 100-week Exponential Moving Averages (EMA).
Also, the Relative Strength Index (RSI) has remained below the neutral level. Also, there are signs that the company is highly undervalued considering its spectacular deliveries.
Therefore, the stock will likely bounce back in the second half of the month as buyers target the key resistance point at $9.66, its highest point in December last year. This forecast means that it could more than double from the current level.
The post Nio stock price analysis: cheap and a good speculative buy appeared first on Invezz
