Is Nio Stock a buy as this catalyst looms for Tesla’s emerging rival?
from China Nio (NIO) continues to see strong demand for its luxury electric SUVs, while expanding its range of electric cars and innovating EV batteries. But the flea problems persist. Is Nio stock a buy right now?
During Nio Day on December 18, the EV startup could present a cheaper entry-level ET5 electric sedan. It could also reveal a new mainstream brand. Deutsche Bank analyst Edison Yu sees the upcoming event as a catalyst for NIO stock.
Founded in 2014, Nio had little experience in vehicle manufacturing when it entered the scene. But the EV startup, sometimes referred to as Tesla of China, continued to generate booming sales. contrary to You’re here (TSLA), Nio does not manufacture its own electric cars, but partners with a public car manufacturer.
Nio Benefits And Fundamental Analysis
On key earnings and other fundamental metrics, Nio is lagging behind. It is a young and growing company, always looking to make a profit.
The Nio share wins a BPA Rating 44 out of 99, and one SMR assessment of D, on a scale of A to worst E. The EPS rating compares the growth in earnings of a company relative to other companies. The SMR score measures sales growth, profit margins and return on equity.
On November 10, Nio delivered a less than feared loss for the third trimester. Nio lost 6 cents a share as earnings climbed 117%. But the startup has given a weaker-than-expected revenue outlook for the fourth quarter, as chip shortages and production challenges continue.
Analysts expect Nio to cut losses to 64 cents a share for all of 2021, from 73 cents in 2020, according to FactSet. Revenue is expected to increase 123% this year.
In Q3, Nio doubled EV sales, but Chinese startups compete Li Auto (LI) and Xpeng (XPEV) almost tripled sales. In October, Nio’s electric vehicle sales fell 27.5% while Li Auto and Xpeng continued to post triple-digit year-over-year growth. Chip supply issues and manufacturing upgrades ahead of new EVs in 2022 weighed on sales, Nio said.
In the midst of fierce competition, Nio is accelerating the launches of new electric vehicles. It aims to deliver three new products in 2022. These include the ET7, its first electric sedan and the most high-tech vehicle to date. The ET7, unveiled at last Nio Day, is expected to offer more than 600 miles of battery range, as well as highly autonomous driving.
Its launch is scheduled for the first quarter of 2022 in China and by the end of 2022 in Europe.
Of 22 analysts covering Nio stock, 19 rate it as a buy, two have a hold and one has a sell, according to FactSet.
Nio Stock Technical Analysis
Nio’s US-listed shares remain 41% below the January high of 66.99. Nio stock weakens after a seven-week rally, back below the 200-day line. The stock remains well under 55.23 point of purchase from a cup base, according to MarketSmith graphical analysis.
China’s crackdown on data collection weighed on Chinese stocks, including Nio. More and more âintelligentâ electric vehicles generate a lot of data. The company also faces increasing competition in the electric car market.
The relative line of force for Nio the stock is lagging behind. It has risen sharply for most of 2020. A rising RS line means that a stock is outperforming the S&P 500 Index. This is the blue line in the graph shown.
Stocks earn a lackluster IBD Composite assessment 48 out of 99. The score combines the keys fundamental and technical metrics in one partition. A 28 RS dimension means Nio has only outperformed 28% of all stocks in the past year.
by Nio Accumulation / distribution rating of C- reflects roughly equal buying and selling by large investors over the past 13 weeks. In September, 876 funds held shares. NIO share posts zero quarter increase in fund holdings, according to IBD Inventory Check Tool.
Competition from electric vehicles in China is growing
Chinese and American auto giants are also entering the luxury electric vehicle market. These companies include China BYD (BYDFF) and Geely. This year, BYD’s electric vehicle sales, including hybrids, are booming.
Yet Nio continues to increase sales of electric vehicles, having more than doubled in 2020, and coming back from the brink of bankruptcy.
By 2030, fully electric and hybrid electric vehicles will account for 90% of new car sales in China, Forecast from Nio CEO William Li. This would represent an increase of around 10% in March, which suggests sufficient room for growth.
Nio plans three new electric vehicles in 2022, including the ET7, its first electric sedan. The trendy Chinese start-up already makes three high-end electric SUVs, including the ES8, ES6 and EC6.
While increasing its capacities in China, Nio is expanding abroad. It sells the ES8 in Norway. It plans to sell the next ET7 in Norway and Germany in 2022. Chinese counterparts BYD and Xpeng are also in Norway, with Li Auto also considering entering Europe. Chinese electric vehicle makers are challenging Western automakers, including Tesla, on the mainland.
Outlook for Nio, EV shares
At home, the Chinese Nio, Li Auto and Xpeng are developing to repel Tesla.
Sales of electric vehicles in China are expected to increase by more than 30% to reach 1.8 million units in 2021, according to the China Association of Automobile Manufacturers. Globally, sales of electric vehicles are expected to increase by 70% in 2021, according to IHS Markit.
But the global semiconductor shortage could foreshadow a shortage of batteries for electric vehicles, analysts say. The chip crisis hit Nio, as well as Tesla, Volkswagen (VWAGY), General Motors (DG) and Ford (F).
Nio’s growth drivers include new and upcoming electric vehicles. Meanwhile, battery services are key to its business model.
Nio offers an innovative subscription plan for batteries. Basically the car and the battery are sold separately. Users can buy Nio electric vehicles without batteries for a lower price and ârentâ batteries for a monthly subscription. They can also swap out car batteries according to their needs.
In July, Nio announced vast expansion of battery exchange stations and 2.9 million battery exchanges, up from 1 million last October. It took battery swaps in Norway, challenging Tesla even more.
Is Nio Stock a buy now?
Fundamentally, Nio’s financial position is improving after debt and liquidity fears brought stocks down. It drastically reduced losses while delivering huge revenue gains.
An expanding range of vehicles, entry into Europe and battery innovations mean more avenues for growth. But the electric vehicle war is escalating. In the short term, the tight supply of chips is a headwind for Nio. Longer term, the battery supplies could be a same biggest puzzle for electric vehicle inventory in general.
Bottom line: Nio stock is not a buy at this time.
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