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After its latest results, where does NIO stock go next?

Charlie Keough — Thu, 08 Sep 2022 09:33:54 +0000

2022 has been far from a smooth ride for NIO (NYSE: NIO) stock. The Chinese electric vehicle manufacturer grabbed headlines with its monumental 1,100% rise in 2020. Yet since then, it’s struggled to keep up the impressive momentum.

The NIO share price is down nearly 50% this year. Across the last 12 months, the stock has fallen 54%.

So, where will NIO stock go next? Should I be steering clear of it? Or at $17 is this an opportunity for me to grab some cheap shares? Letâs find out.

Latest results

Yesterday saw the release of the firmâs Q2 results. Within the update, there were encouraging signs. Vehicle sales rose by 21% year on year to $1.43bn, and 3.5% compared to Q1. On top of this, total revenue rose by 21.8% compared to Q2 2021 to reach $1.53bn.

Despite this, NIO shareholders will no doubt be focusing on the fall in gross profit. This dropped 14.8% on the year. And compared to Q1, the figure fell 7.4%. What will also be of concern is the firmâs net loss, which widened by a massive 369.6% against a year ago.

2022 struggles

These results paint an accurate picture of NIOâs struggles this year as rising inflation across the globe has pushed up costs. As the business said itself, 2022 has been plagued by âtremendous challenges and cost volatilities.â

NIO has also faced a string of supply chain issues. With China in a continuous battle to eliminate Covid infections, the firm has seen its production halted for stretches.

Despite this, it still predicts it will deliver between 31,000 and 33,000 vehicles in the third quarter, showing it has no plans to slow down.

Electric transition

Even with the above, the biggest issue I see surrounding NIO is the inevitable transition to an electric world, which will have both its benefits and drawbacks.

First, thereâs no doubt that governments across the globe will magnify the emphasis placed on the transition to renewable energy. This has already been taking shape. And with the Russia-Ukraine conflict proving it, a reliance solely on conventional energy sources is unsustainable.

For NIO, this is clearly good news. As electric cars become more mainstream, hopefully, the business will see demand for its vehicles increase.

However, this does also alarm me. That’s because I can see a surge in competition in the years ahead as established manufacturers accelerate in the attractive EV market. NIO is expanding in Europe, which should provide the firm with a boost. But how the Chinese firm fares in whatâs set to become a saturated market is of concern to me.

Where next?

So, where does the business go from here? And should I be buying NIO stock?

I wonât be buying today. As inflation continues to rise this may further hinder NIOâs operations. And despite it having unique selling points such as its battery-swapping technology, Iâm not confident in judging how NIO will stand up against the unavoidable competition. Its share price is low, but right now, it’s not for me.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Here are two beaten-down growth stocks I like the look of today

Dylan Hood — Tue, 30 Aug 2022 06:44:00 +0000

2022 has been a year characterised by surging inflation. Caused by supply bottlenecks from Covid-19, ultra-low interest rates, and magnified by the Russia-Ukraine crisis, inflation reached 10.1% in the UK in July. Across the Atlantic, the situation was similar, with prices rising 8.7% year on year in July.

With inflation rising, central banks are hiking interest rates. This is placing big pressure on growth stock valuations, as people pull their money out of speculative assets. At historically low prices, I’m looking for bargain growth stocks that could land me some big returns in the future. Below are two stocks I currently have my eye on.

NIO

NIO (NYSE: NIO) is a Chinese electric vehicle manufacturer. It had a standout year in 2020, when its shares climbed over 1,100%. However in 2022, things haven’t been as easy with the shares falling 40% year-to-date. Over 12 months, the shares are down 47%.

The reason I like the look of this stock is due to its remarkable results. In Q1, the firm saw its year-on-year deliveries rising by 29%, with revenues climbing by 24%. Although NIO is still loss-making, its losses shrank 10% compared with the previous quarter, which is a good sign. In 2021, revenues soared by over 122%!

NIO also boasts some market-leading tech when it comes to battery charging. Its cars feature unique battery swapping technology that can be applied in a matter of minutes. Being the only manufacturer to offer this service, I think the stock is well poised to capture market share.

Rolls-Royce

Rolls-Royce (LSE: RR) is a UK-based civil engineering and defence company. It was hit hard by the pandemic in March 2020 and recorded a hefty £4bn loss for that year. However, recently the firm reported a profit for the first time since then, signalling a strong recovery so far in 2022.

Rolls makes the majority of its money from servicing aeroplane engines. With global travel increasing, I think Rolls could be in a great spot for growth this year. In 2020, just 1.8bn travellers boarded planes. Fast forward to 2022, and it’s predicted that 3.5bn customers will board flights. This should help boost revenues so the group can keep delivering profits.

Rolls is also leading the stride in small-to-medium-sized nuclear reactor technology. It expects to receive clearance to roll out these reactors by 2024 and has already signed contracts with governments around the world to implement them.

The caveat

I think that both of these companies exhibit some great fundamentals. However, no matter how these firms perform over the coming year, rising inflation could continue to plague their stock prices. If this is the case, then they could fall even lower – regardless of their encouraging results. However, adopting a long-term view, I think these stocks could be great additions to my portfolio at their current prices.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

NIO shares are falling: is it time to buy at $19?

Dylan Hood — Mon, 22 Aug 2022 08:41:16 +0000

NIO (NYSE: NIO) seems to have been fighting an uphill battle so far in 2022. Supply disruptions, Chinese regulators, and Covid-19 restrictions have plagued the automobile manufacturer and as a consequence, its shares have fallen over 43% this year. Over the last 12 months, the shares have fallen an even greater 48%. So, currently sitting at $19, is now the time for me to add this Chinese EV stock to my portfolio? Or should I steer clear? Let’s investigate.

The lowdown

A major driver behind NIO’s poor share price performance has been the state of the macroeconomy. Inflation has been soaring across the globe, caused by a combination of Covid-19-related supply bottlenecks and soaring energy prices stemming from the tragic Russia-Ukraine conflict. Central banks across the globe have been hiking interest rates in an effort to curb this red-hot inflation. When rates rise, it weighs on growth stock valuations as investors shy away from speculative assets and pour money into safe ones. Evidently, this has been bad news for NIO.

Another threat the company has been battling is supply issues caused by a series of lockdowns in Shanghai. The lockdowns forced NIO — along with other Chinese-based EV companies like Li Auto and Xpeng — to slow down or even halt production. This resulted in a series of disappointing monthly delivery figures that seemed to have tipped investors’ sentiment away from the stock.

The firm has also been facing domestic pressure from Chinese regulators. The Chinese government aimed to curb the power of US-listed Chinese companies, and NIO has faced delisting fears as a consequence. The EV giant has undertaken secondary listings in Hong Kong and Singapore to mitigate this risk, but the threat has put serious pressure on the share price in recent months.

Electric results

In the company’s Q1 2022 results, it outlined some encouraging metrics. Year-on-year deliveries rose by 29%, with revenues climbing 24% to $1.5bn. In addition to this, the firm’s losses shrank 10% compared to the fourth quarter of 2021. This highlights the encouraging move towards profitability. In its full-year results for 2021, NIO outlined it had increased its sales by 118%, with revenues climbing a staggering 122% compared to the year prior. If it can continue this trajectory in 2022, then I think it could have a rosy stock exchange future.

A product-specific standout that entices me to buy the stock is its unique battery switching technology. Users can swap out their battery within minutes, making it super convenient. At present, NIO is the only manufacturer offering this service in the EV market. This edge could help the firm keep its market share in the extremely competitive industry.

The verdict

NIO has experienced astronomic growth in the last few years and has some market-leading tech behind it. However, for me, the macro-outlook is just too risky to invest in growth stocks at the moment. In addition to this, the supply issues and Chinese regulatory threats could continue to plague the firm. As such, I won’t be buying any shares at $19.

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As NIO stock continues to fall, should I buy the dip?

Jabran Khan — Thu, 18 Aug 2022 15:17:00 +0000

In 2020, NIO (NYSE:NIO) stock soared. More recently, however, the shares have pulled back. Should I look to buy the dip or avoid NIO stock?

Electric vehicles for the green revolution

As a quick reminder, NIO is a Chinese electric vehicle (EV) business that targets the premium segment of the market. It looks to differentiate itself from other players with technological innovations such as battery swapping.

So what’s been happening with NIO shares then? Well, as I write, they’re trading for $20. At this time last year, the stock was trading for $38, which equates to a 47% decline over a 12-month period.

Looking as far back as January 2021, NIO stock was trading at all time highs of $67, which means the shares have fallen nearly 70% over an 18-month period.

The investment case for NIO stock

I believe that NIO stock has fallen for two primary reasons. These are macroeconomic headwinds and growth issues in China.

Macroeconomic headwinds currently affecting many businesses include soaring inflation, the rising cost of raw materials, as well as the supply chain crisis. All of these factors have played their part in pushing down NIO stock. When inflation soars, growth stocks such as NIO tend to be affected due to investors looking for safer investments. Supply chain issues, as well as rising costs, could have an impact on profitability.

Next, there has been a slowdown in economic growth in China, one of the world’s largest economies and a key market for NIO. It could see growth negatively affected, in turn, driving down investor sentiment.

On the other side of the coin, I believe NIO stock could recover and head in an upward direction. Sentiment and directives from governments to cut carbon emissions and move towards EVs are ramping up. Many vehicle manufacturers are committing to halting production of traditional petrol and diesel vehicles in the years ahead. This could bode well for EV sales and NIO.

My investment strategy has always been to buy and hold for the long term. For this reason, NIO stock looks an attractive prospect to me based on the fact it is a Chinese business with access to the Chinese market. China’s pollution levels are among the highest in the world. Despite current challenges, in the longer term, I believe NIO could dominate the market there, which could boost performance and returns.

Finally, as well as NIO’s technological advancements, it has diversified its business model. It has opened the NIO Life Store, which sells NIO-branded goods for consumers.

What I’m doing now

I’ve decided not to buy NIO shares for my holdings. For me, the negatives outweigh the positives currently. I am buoyed by certain aspects of NIO’s business such as its access to a potentially lucrative Chinese market, as well as its technological innovations.

The negatives noted above for me are also supplemented by competition as there are established vehicle manufacturers who will and have already entered the EV market. They already have an established presence, profile, and a brand following. Furthermore, NIO has not turned a profit yet and anticipates it won’t do so until at least 2024. Right now, NIO stock is one I will keep on my watch list.

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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

NIO stock is above $20. Where will it go next?

Charlie Keough — Wed, 17 Aug 2022 08:24:19 +0000

After its incredible 1,100% rise in 2020, NIO (NYSE: NIO) stock has hit the brakes. While 2021 saw a sharp slowdown in growth, 2022 has seen the stock pegged back by 36%. In the last 12 months, it’s down 45%.

This isnât good news for NIO investors who, following 2020, may have thought the Chinese electric vehicle manufacturer was about to follow in the footsteps of rival Tesla.

However, now trading for above $20, will it be able to stay there and progress further?

The story in 2022

The main reason for NIOâs large fall this year is inflation. Rates have spiked globally. And as a result, many growth stocks have taken a hit. This isnât uncommon in volatile times like these. And this is because investors look for âsaferâ alternatives than these riskier equities. To add to this, supply chain issues and Chinaâs zero Covid strategy have also halted production at times this year.

Despite this, the business still posted some strong results in Q1. Deliveries were up 28.5% year on year to 25,768, while vehicle sales rose nearly 25% to $1.5bn. Total revenues also grew by 24.2%. However, gross profit did fall by 6.9%.

Competition

More widely, an important factor regarding NIO stock is the heightened push to an electric world. And I see this taking one of two directions.

Firstly, it’s inevitable that more governments worldwide will expand their emphasis on a transition fuelled by renewable energy. Itâs already been seen in the UK with a ban on the sale of petrol and diesel cars from 2030. And Iâd expect moves like this to become common worldwide.

For NIO, this is obviously good news. With a larger push comes, hopefully, a rise in demand for its products.

However, it could also spell trouble. As the EV space continues to grow, there will naturally be a rise in competition. More established manufacturers such as Ford have already made bold all-electric commitments. Even higher-end manufacturers such as Porsche have electric vehicles available, while Ferrari has plans for 40% of its sales to be from fully-electric cars by 2030.

While NIO has seen tremendous growth in the past, this could slow as we see more of the competition targeting a slice of the lucrative market.

Despite this, NIO does have tricks up its sleeve that could keep it ahead of the curve. For example, its battery-swapping technology allows users to swap empty batteries for new ones in a matter of minutes. Should it keep producing cutting-edge technology like this, NIO may be able to keep ahead of competitors.

Where next?

So, where will NIO stock go from here?

Well, while it may be able to continue its impressive growth due to its innovative nature, I wonât be buying NIO stock today. As inflation continues to bite, I think it could slip further this year. With competition also looking like it’s going to heat up, this is of further concern for me. Iâll be keeping NIO on my watchlist for now.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Is NIO stock a buy at $20?

Dylan Hood — Mon, 08 Aug 2022 08:27:07 +0000

NIO (NYSE: NIO) has been an interesting stock to follow so far in 2022. Throughout 2020, it rose over 1,100%, but this momentum seemed to dissipate throughout 2021. Moving into 2022 and the stock has been pretty volatile. After reaching a low of just $12 in May, the stock has since charged back up over $20. Regardless of the recent positive movement, year-to-date returns are still pretty disappointing, with it down 40% this year. Over a 12-month span, the case is similar, with it falling 54%.

So, currently at the $20 mark, is now the time for me to buy this Chinese EV stock? Or should I steer clear? Let’s investigate.

Global economy

One risk I see for NIO moving forward is the state of the global economy. Inflation has been climbing at an astonishing rate so far in 2022 and shows no sign of slowing down. Caused by a combination of Covid-19-related supply chain issues, fiscal stimulus, and the Russia-Ukraine war, US inflation reached 9.1% in June. The outlook for the rest of 2022 is that this figure will continue to rise.

Inflation erodes the future value of a company’s earnings, which is bad news for a firm like NIO that’s yet to turn a profit. In addition to this, central banks tend to raise interest rates when inflation rises as a way of slowing down economic growth. On Wednesday last week, the US Federal Reserve announced it was raising the bank rate to 2.5%. As rates rise, people can earn higher interest on safer assets, and hence they turn away from riskier growth stocks like NIO. Continued rising rates could pose a threat to the NIO share price.

Encouraging results

However, when looking at the firm’s growth, I see some exciting stuff. In its Q1 2022 results, it outlined a 29% increase in year-on-year car deliveries. Revenues increased by a similar amount, reaching $1.5bn. NIO’s growth in 2021 was even crazier. Vehicle sales rose 118% and revenue rose a whopping 122% compared to 2020. If it can keep up this high level of growth, I think the stock will inevitably rise in the future.

Another edge that NIO has over its competition is its advanced battery-changing technology. The tech allows users to swap out their old battery within minutes at its own charging stations. No other competitor in the EV space currently offers this service, which could help it retain its market share.

The time to buy?

No doubt, the growth of NIO has been very impressive to watch. Its innovative tech also gives the firm an edge in a fiercely competitive market. However, I think that rising interest rates and inflation could continue to place a lid on the growth of the stock. Unfortunately, this is out of the company’s control and is the case for other growth stocks too. Therefore, I won’t be buying any shares at $20.

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The NIO share price continues to fall. Should I buy?

Charlie Keough — Tue, 26 Jul 2022 08:36:00 +0000

Chinese electric vehicle manufacturer NIO (NYSE: NIO) has made a name for itself over the past few years. The business came to prominence in 2020, rising over 1,100% during this period. However, the last 12 months have been more humbling for the stock, as it has plummeted 55%.

The NIO share price dropped as low as $12 in the past year. But with it currently sat at $19, is now the time to buy?

The year so far

One reason NIO has seen a fall is because of red hot inflation. Higher rates have a bad impact on the value of future earnings. And to add to this, growth stocks, a group of which NIO is a prominent member, also take a hit during volatile periods like now. This is because investors shy away from high-risk investments in search of safer places to store their cash.

Spiking inflation also leads to higher interest rates, as central banks look for ways to control the blaze. For a stock like NIO, which borrows heavily to fuel growth, this is also bad news as this debt becomes more expensive.

More specifically, the business has also seen its operations hit by supply chain issues. As China continues to grapple with Covid, NIO has seen its production come to a halt for periods this year. This will more than likely have a negative impact on NIO’s sales figures for 2022.

Wider outlook

While the firm has faced multiple pressures year-to-date, there are other factors to consider.

One of these, which is difficult to ignore when considering buying NIO shares, is its impressive growth. 2021 saw revenues increasing 122% year-on-year. And even in 2022, despite the issues mentioned above, the business has managed to post fairly strong delivery figures. As a potential buyer, this is encouraging.

However, one issue for me is competition.

This doesn’t only apply to NIO, but to all EV manufacturers. And while I believe there are plenty of opportunities within the sector, as this space continues to grow, competition will naturally heat up.

This can be seen through established manufacturer Volkswagen, which has already made headway in the industry. While Ford has also pledged a commitment to be all-electric by the end of the decade.

As governments worldwide make larger pushes towards an electric world, this competition will only become fiercer. As a result, NIO may struggle to maintain its impressive growth. There’s little doubt this would mean its share price suffering.

With this said, NIO may sustain a competitive advantage through its battery-swapping technology. The firm describes it as a “fully-automatic battery swap in just a short coffee break,” as the technology allows users to swap out their empty battery for a fresh one in the space of minutes.

Would I buy?

NIO’s growth is incredibly impressive. And with its cutting-edge technology, it may be able to stay ahead of competitors. However, I won’t be buying the stock today. Increasing competition worries me. And with concerns surrounding the Chinese economy at the moment, I don’t think now is the time to for me to dive in.

I’ll be keeping NIO on my watchlist for now. Should its share price fall in the months ahead, I may be tempted to open a small position.

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Is NIO stock about to explode?

Dylan Hood — Mon, 11 Jul 2022 11:46:29 +0000

Since mid-April, NIO (NYSE: NIO) stock has been on a rampage. After reaching a yearly low of $12, the stock has climbed 77%, currently sitting at $22. While this still marks a disappointing year-to-date drop of 32%, things seem like they could be on the up for the Chinese EV manufacturer.

Expanding the time horizon to 12 months, NIO shares are down an equally disappointing 51%. However, I think this could offer me the chance to grab some cheap shares for long-term growth. I’ll explain why below.

The story so far

In 2020, NIO stock exploded in value, along with many other growth stocks. However, this momentum stalled at the start of 2021. And throughout the first six months of 2022, rising inflation and interest rates have weighed down on NIO shares. Rising interest rates put pressure on growth stock valuations, as people can earn higher risk-free returns on safe assets.

Looking to the future, it seems that rates will continue to rise throughout 2022 and beyond. In fact, investment bank Goldman Sachs has indicated it expects another five rate hikes in the US throughout the remainder of 2022. If this is the case, NIO stock could struggle to maintain its momentum.

Another reason why NIO shares have struggled (and could continue to do so) is the Chinese regulatory authorities. The Chinese government has been imposing tariffs on Chinese companies listed in the US, in an effort to curb their power. This has sparked delisting fears for NIO, which has prompted it to undertake secondary listings in Hong Kong and Singapore to mitigate the risk.

However, it seems that the worst of these regulatory threats are in the past, and Beijing is doing all it can to encourage Chinese EV firms. It recently announced it would be extending subsidies for customers who buy domestically made electric vehicles. This announcement, made on Friday, pushed NIO shares 8% higher.

Is now the time to buy?

I find it hard not to notice NIO’s consistently high growth, which increases nearly every month. For example, in June, it delivered 12,961 vehicles, a 14.4% year-on-year increase. For the three months, ending June, deliveries rose by over 14% compared to the year before.

NIO also boasts some market-leading technology. Its new ET7 sedan has a range of 1000km, which far outshines EV world leader Tesla. Also, it has a unique battery swap system, which allows batteries to be swapped in just a few minutes at its own charging stations.

The verdict

I think the stock could be a great addition to my portfolio at the current price. Yes, there are prevalent macroeconomic risks that could hold back its growth, however, I think that in the long run, its unique tech and high growth will counteract this risk. Therefore, I think that over the next few years, NIO stock could ‘explode’ in value, and I would be happy to add it to my portfolio at the current price.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

NIO stock is rising: should I buy now?

Dylan Hood — Mon, 20 Jun 2022 08:36:00 +0000

NIO (NYSE: NIO) stock popped last week, rising over 29%. The primary reason for this was the unveiling of its new ES7 EV SUV. While this is good news, the shares are still down 37% year-to-date, and 54% over the past 12 months.

So, with NIO back on the rise is now the time for me to buy some shares for my portfolio? Or should I steer clear of the Chinese EV powerhouse? Let’s investigate.

Why NIO stock is up

As mentioned, the primary reason for the shares rising was the announcement of the launch of its new SUV. It includes the latest autonomous driving technology from NIO and is the fastest SUV the company has ever produced, with a zero to 60 mph acceleration of just under four seconds. It also features the firm’s new battery swapping service. Investors reacted positively to the product’s unveiling, pushing the shares up over 16% after the announcement.

Just 11 days ago on 9 June, NIO released its 2022 Q1 results. Vehicle sales were up 24% year-on-year, with revenues rising by the same percentage. Losses also fell compared to the previous quarter, an encouraging move closer to profitability. However, NIO stock actually slumped on the announcement of this news, as vehicle margins shrank. CEO William Li attributed this fall in margins to “volatilities of supply chain and the challenges in vehicle delivery resulting from the recent Covid-19 resurgence”.

Not out of the woods yet

Although US-listed NIO shares are on the rise, there are still some risks ahead for the firm. Firstly, rising inflation could pose a big threat. It reached a 50-year high in May, hitting 8.6%. The way the US Federal Reserve is tackling these rising prices is by raising interest rates. On Wednesday, the Fed announced that it was hiking rates to a range of 1.5% to 1.75% in an effort to slow economic growth.

This is bad news for NIO as high interest rates tend to encourage investors to sell out of high-risk assets like growth stocks. This is because they can achieve higher risk-free returns. In addition to this, it has over $20bn in debt on its balance sheet, which could be magnified as rates increase. The stock fell 4.6% on the news, with the S&P 500 falling a slightly smaller 4%.

NIO also faces threats from Chinese regulators. The Chinese government has been placing tariffs on some of its largest companies since late 2020 in an effort to limit their power. This has resulted in the stock facing delisting concerns in the US. It has undertaken secondary listings in Hong Kong and Singapore to counter this issue, but it remains a threat.

The verdict

Overall, I think the positive reaction to the product unveiling will provide only a temporary boost for the shares. As inflation and interest continue to rise across the world, I think NIO stock could fall. Therefore, I won’t be buying right now.

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Here’s why NIO shares fell 7% yesterday

Dylan Hood — Fri, 10 Jun 2022 04:14:00 +0000

NIO (NYSE: NIO) shares have been on a rollercoaster recently. They are down 43% year-to-date, yet they are up 40% in the last month. Furthermore, they’ve sunk over 55% in the last 12 months.

So, with the stock falling 7% yesterday, is now a good time for me to snag some cheap NIO shares for my portfolio? Or should I steer clear of the Chinese EV manufacturer? Let’s take a look.

Why NIO shares have fallen

The reason for the drop yesterday was due to the release of the firm’s 2022 Q1 results. On the whole, the results contained some good metrics, highlighting a 2.9% quarter-on-quarter increase in deliveries, and a 0.3% increase in sales. However, gross profits fell 15% quarter-on-quarter, due to margins falling almost 3%. Net losses also increased by 295% year on year. It seems these shaky results have soured investors’ appetite for NIO shares.

More broadly, the stock has been falling due to wider inflationary concerns, as well as Chinese Covid-19 measures. As inflation has soared across the globe, central banks are starting to hike interest rates. This is weighing down on the lofty valuations that growth stocks like NIO experienced at the start of 2021.

The recent Shanghai lockdown also placed pressure on NIO, as the firm was forced to suspend production in April 2022. This led to a reduction in month-on-month production just shy of 50%. In addition to this, Chinese regulators have caused delisting fears for NIO and other Chinese companies based in the US. However, in order to mitigate this risk, NIO issued secondary listings of its shares on both the Hong Kong and Singapore stock exchanges.

Can NIO climb higher?

I think there are a number of reasons why NIO stock will be able to climb higher, especially in the long run. Firstly, the company has continued to grow at an astonishing rate over the last few years. For example, between 2020 and 2021, vehicle deliveries grew 109%. Even in its Q1 2022 results, deliveries rose 28.5% year-on-year. If the company can continue growing at such a rapid rate, I think it could eat up some serious EV market share in the future.

NIO shares also looks very cheap in comparison to its competition. They currently trade on a price-to-sales (P/S) ratio of 4.8. For context, Tesla trades on a P/S ratio of 12, and Xpeng trades on a P/S ratio of 6.8. This shows me that NIO stock could be undervalued at its current price.

The verdict

Overall, I like the look of the shares at their current price. Although margins took a small hit, I think investors overreacted to this news, and a reversal of yesterday’s dip will likely occur. This dip does give me an opportunity to grab some cheap shares, and I am seriously considering making use of it to top up my portfolio.

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