Nio Stock Price Analysis: Cheap and a Good Speculative Buy

Nio (NYSE: NIO) stock price has fallen sharply after peaking at nearly $67 in 2021. It has fallen more than 51% this year, bringing its valuation to over $8.6 billion. Additionally, the stock has melted more than 55% in the past 12 months.

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The electric vehicle industry is in trouble

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Nio’s collapse has come in sync with other electric vehicle companies, which have retreated sharply in recent years. Even Tesla, the world’s best-known electric vehicle brand, has fallen more than 50% from its all-time high. Other American electric vehicle companies such as Lucid Group and Rivian have also fallen, while Fisker filed for bankruptcy in May.

Nio’s stock slump has also coincided with the slump of other Chinese companies. Li Auto’s stock has fallen 47% in the past 12 months, while XPeng has fallen more than 44% in that period. Polestar, which is mostly owned by Volvo, has also fallen 76% in the past 12 months.

This pricing action comes as concerns about the electric vehicle sector continue. Investors fear growing competition and market saturation in key markets like China and the United States. This competition has led to tighter margins for most brands.

Meanwhile, investors believe that Nio’s global expansion plans could face serious regulatory problems. Joe Biden has already implemented a 100% tariff on Chinese electric vehicle companies while Europe will impose a 25% tariff.

Most Chinese companies can handle these tariffs due to the country’s low production costs. What’s unclear, however, is whether there is strong demand for Chinese EVs in key markets like the U.S. and Europe.

Deliveries are still strong

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Despite these challenges, Nio’s business is doing well, as evidenced by its monthly and quarterly delivery data.

The company shipped 21,209 vehicles in June, up 98% from the same period in 2023. It shipped 57,373 in the second quarter, up 143% year-over-year, making it one of the fastest-growing companies in the electric vehicle industry. It has shipped 537,020 vehicles since inception.

These numbers indicate that there is still strong demand for the company’s vehicles even as concerns about growth persist. They also mean that electric vehicle sales are doing well in China, a country that has slowed in recent months.

The latest results showed that the company’s total sales were $1.32 billion in the first quarter, while its net loss was more than $968 million. Nio has pledged to reduce its costs, including announcing two layoffs.

I believe its strong balance sheet means 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 accounts receivable and accounts receivable, and $673 million in restricted cash.

Nio Stock Price Analysis

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NIO Chart by TradingView

In my last article on Nio stock, I noted that it could recover by the end of the year after forming a falling wedge chart pattern.

In the weekly chart above, we see that the wedge is still forming and approaching the confluence level, which is a positive sign. The stock remains slightly below the 50-week and 100-week exponential moving averages (EMAs).

Furthermore, the Relative Strength Index (RSI) has remained below the neutral level. Furthermore, there are signs that the company is highly undervalued considering its spectacular deliveries.

Therefore, the stock is likely to recover 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 it could more than double from its current level.