Is EV Maker NIO (NIO) Stock a Buy After an 80% Drop?

Shares of Nio (NYSE: NIO) are trading 71% off the all-time high set in January of 2021 after a series of events and catalysts forced the electric vehicle (EV) stock to de-rate.

Inflation Pushes EV Prices Up

Nio recently announced it will hike prices and halt production amid the most recent coronavirus outbreak in China.

The EV company said during the weekend it plans to hike the prices of its ES8, ES6, and EC6 SUVs by 10,000 yuan ($1,572) on May 10. Prices for the new ET7 and ET5 vehicles will remain unchanged.

The price increase comes after higher raw material costs, especially batteries, with no signs of a downward trend in the near future, said Nio CEO William Li. 

“Originally [we] thought we could bear it, but now with this pandemic, it’s even harder to bear,” Li said. “We have no alternative but to raise prices. Please be understanding.”

 

 

 

The EV maker was forced to halt the production in April after Chinese authorities imposed tighter coronavirus measures to curb the latest wave, suspending production at suppliers’ factories as well. 

“Due to the impact of Covid on Changchun and Hebei, the supply of some of our auto parts has been cut off since mid-March,” Li said. The company’s production “managed to rely on auto parts inventory until last week.”

Deliveries of Nio’s ET7 sedan started late last month, while the ET5 model is expected to begin deliveries in September. 

Nio is the last of the three Chinese EV startups to hike prices after Xpeng and Li Auto hiked prices for their vehicles by 10,100 yuan and 11,800 yuan, respectively. Tesla also increased the prices of its cars in China in recent weeks. 

Nio has been reportedly holding talks with multiple other automakers about licensing its battery swap solution, which became one of the company’s key strengths of its strategy to increase its market share in Europe.

The company has been negotiating with local and international carmakers to expand its network of battery charging stations. Nio expects to raise the number of its charging stations to 5,000 from 800 by the middle of the decade and build 1,000 battery swap stations outside China by 2025, mainly in Europe and the U.S.

Forecast Misses Consensus

Nio recently reported better-than-expected Q4 revenue, however, the company’s Q1 revenue forecast missed analyst expectations.

The carmaker reported Q4 revenue of 9.90 billion yuan, up 49% year-over-year and above the consensus estimates of 9.72 billion. Nio reported 25,034 deliveries in the period, up 44% from the year-ago period and topping the estimates of 24,945. 

Adjusted loss per American depositary receipts came in at 1.07 yuan, compared to the loss per share of 93 RMB in the year-ago quarter and the expected loss per share of 1.00 yuan. 

The gross margin in Q4 stood at 17.2%, unchanged from last year, and below the consensus estimates of 17.6%.

For the first quarter, Nio expects revenue in the range of 9.63 billion yuan to 9.99 billion yuan, missing the analyst consensus of 10.5 billion yuan.

“We concluded the year of 2021 on a strong note with an annual delivery of 91,429 vehicles in total, representing an increase of 109.1% year-over-year, despite all the challenges including the supply chain volatilities in particular,” the company said. 

Nio said it plans to add three new products based on NIO Technology Platform 2.0 in 2022. 

The company was listed on the Hong Kong stock exchange on March 10.

Is Nio Stock a Buy?

UBS analysts upgraded Nio stock to “Buy” from “Neutral” recently after a sharp decline over the past 15 months. Analysts are expecting to witness stronger sales after the launch of new models. 

Analysts also noted improvements in Nio’s brand recognition and expect new models to enhance the digital experience and autonomous driving features.

UBS raised the price target for Nio to $32. 

Given an improved macro and regulatory environment in China, US-listed shares of Chinese companies soared recently. One could expect that shares of EV makers start to climb higher following a massive drop in the past 15 months as gas prices hit multi-year highs. 

Summary

Nio shares are trading significantly lower in recent months with some analysts seeing an attractive investment opportunity as the company prepares to launch new models and reap the benefits of raised pricing.

Beat The Market With Our Expert Stock Picks

If you invested in 10 of our featured stock picks over the last 5 years, your chances of beating the market would be 90%.

Our last 3 stock picks grew a combined 348% after our alert!

Want to be notified the next time we issue a “Big Buy” alert or update our stocks to buy list? Sign up below today.