NIO Inc. (NYSE: $NIO) is an automobile designer, manufacturer, and seller of high-quality electric cars and innovative technologies in autonomous driving, electric power trains, and batteries. Its headquarters is in Shanghai, China. The company’s stock NIO) has been stuck in limbo. Below are some of the reasons for its varied performance.
NIO Inc. Appoints Independent Director
On Monday, November 13, 2023, NIO Inc. announced that it had appointed an independent director to the board. Following the announcement, the price of NIO stock went up slightly. The new board member, Yonggang Wen, is an expert in Computer Science and Engineering. He received his PhD at MIT in 2008.
Fierce Competition
While a major player in the EV market, Nio faces stiff competition. In China alone, the company has to deal with at least three major EV companies, including Tesla.
Due to the intense competition, the company announced it would lower its prices in June 2023. It took the measure following price cuts by other players. Due to the intense competition, Nio has recently had to lay off nearly 10% of its workforce.
Nio is Not Yet Profitable
In its most recent delivery update, Nio said deliveries had grown nearly 60% in October 2023. It shows that there is a growing demand for EVs. However, Nio still needs to make them efficient enough to profit.
According to its most recent update on the manufacturing process, Nio has been losing nearly $35,000 on every car it manufactures. In the Q2 2023 earnings report, the company reported a loss of $835.1 million, more than twice its loss the previous year and nearly 30% larger than it lost in Q1 2023.
Nio Faces Challenges in Europe and North America
Nio has been facing a lot of resistance to its entry into the European market. Currently, it is seeking dealers and partners in its launch of the Firefly EV, which is targeted at mid-market buyers.
The company is also mulling plans to enter the US market by 2025. However, it would need to set up an expensive battery swap system to make it in the US market. It is exploring potential partners to help it capture the lucrative North American EV market. Thus far, it has not released any solid plans.
Deliveries Forecast
The company expects deliveries of 55,000-57,000 units in its business outlook section, which would increase 74.0%-80.3% compared to the same quarter last year. Total revenue is predicted to be at $2.61-$2.69 billion, a growth of 45.3%-50.1% from the same quarter in 2022.
Despite the projected growth, analysts expect Nio to continue reporting net losses for the short term. The company is currently hemorrhaging cash. At the end of June, it reported holding $4.3 billion on its balance sheet.
That was down from the $5.5 billion reported at the end of March and the $6.6 billion it reported in Q4 2022. At the rate of $1.1 billion per quarter, the company will soon run out of cash. That could lead to major liquidity concerns in fiscal 2024/2025.
Nio Stock Performance
NIO stock has had a tough run in 2023. The stock is down 23.52% year-to-date. As of 10:40 AM EST on November 16, 2023, the stock is down 8.56%, trading at $7.22 per share. NIO stock has been trading sideways for most of the year. Despite this, some investors remain bullish on the stock.
Stock Price Forecast
The analysts give NIO stock a moderate buy rating. Its rating is based on solid delivery numbers that the company has reported in the past quarters. That rating could change depending on the company’s performance in the upcoming earnings report slated for release in late November 2023.
Analysts give NI stock a high price target of $18 and a low of $8, for an average price target of $12.33. The average target price represents a potential upside of 69.60%.
Should You Buy NIO Stock?
The EV market is rapidly growing all over the world. Thus far, Nio has focused most of its efforts on China. However, the company is mulling plans to expand into Europe and North America. If their efforts succeed, NIO’s stock value could grow long-term. Adding NIO stock to your portfolio would be a good measure for long-term investors.
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