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While the car may review well, competition and mounting problems with the company create questions about whether the company holds much of a future.
Nio is not the “Tesla of China.” I know a lot of people say it is, but sales figures and market share simply fail to back up that claim. It is actually one of nearly 500 electric car companies currently operating in China.
As of now, NIO constitutes less than 2% of the electric vehicle (EV) sales in China. They sold only 837 cars (not a misprint) in July, the latest month for which we have sales figures. It loses money and a lot of it. The company will not repeat the $10.36 per share loss of 2018. However, analysts still forecast $1.23 per share in losses in fiscal 2019 and 79 cents the next year.
Nio Isn’t Tesla
Tesla may have its issues. However, it remains a huge threat to NIO and its China-based peers. Tesla is currently building a Gigafactory in Shanghai. Most foreign car companies in China have to contend with a 10% purchase tax levied on their cars. Thanks to the Gigafactory and some lobbying by Mr. Musk, Tesla won an exemption.
Additionally, it released its information on July 2, right after the quarter ended. For NIO, we still have no sales figures for August. As Vince Martin mentions, the lack of second-quarter earnings numbers causes even more concern for Nio stock.
It also has not announced a date upon which the company plans to release those figures. The foot-dragging may not indicate anything nefarious. However, companies who have good news to report typically do not hesitate to publish such information.
Presence brings publicity to NIO
Honestly, the biggest reason both myself and my InvestorPlace colleagues talk about Nio is that there is a stock to discuss. NIO happens to trade publicly, while virtually none of the others have introduced a stock that trades on U.S. markets. This is probably huge from a marketing standpoint as I doubt it would receive so much attention on this side of the Pacific otherwise. However, this has not translated into sales.
Currently, the stock price stands near the $2.70 per share range as of the time of this writing. In fairness, the company has some attributes that have saved it from falling further. Analysts expect it to grow its revenue by 126.9% this year and 90% in fiscal 2020. The ES6 and ES8 have also impressed critics outside of China.
But NIO needs more. With losses projected for years into the future, NIO may fail to ever get its act together financially. The quality of the car at least increases the odds of a buyout. Unfortunately, current stockholders have no way of knowing whether that would happen at 40 cents per share or $40 per share. Given current conditions, I would not buy Nio on this hope.
The Bottom Line on Nio Stock
Nio needs to stand out above its competition. The bottom line is that the company sells too few vehicles for anyone to take seriously. Once the Shanghai Gigafactory begins producing cars, Tesla itself will become the Tesla of China.
For Nio to earn such a designation, it needs a massive increase in car sales. With the country in the middle of a trade war, intense competition, and a possible recession looming, it is hard to see where NIO will find those buyers.
Mr. Martin describes NIO as the extremely cheap stock that should be cheaper. The poor sales and the slow pace of the earnings release make that a harsh but accurate description.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.
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