3.0600 +0.01 (0.33%)
After hours: 7:32PM EDT
|Bid||3.0400 x 47300|
|Ask||3.0400 x 40000|
|Day's Range||3.0200 - 3.2700|
|52 Week Range||2.3500 - 13.8000|
|Beta (3Y Monthly)||N/A|
|PE Ratio (TTM)||N/A|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
Nio Inc (NASDAQ:NIO) stock has been on a downward slide since a lukewarm intial publi offering (IPO) in September 2018.Source: THINK A / Shutterstock.com By the looks of it, some analysts are still bullish on NIO stock, but if the company disappoints on their projection of between 2,000 and 2,500 deliveries for August, whatever bullish sentiment remains may fade quickly. Nio Is Stuck in the Middle of China's ProblemsYes, it's fair to point out that the Chinese economy is slowing. It's also accurate to note that Chinese auto sales have slumped. While some of that is due to the trade war with the United States, the Chinese government has recently reduced subsidies that were providing a buying incentive for electronic vehicles.InvestorPlace - Stock Market News, Stock Advice & Trading TipsNio also self-reported a battery recall for its ES8 vehicles. While recalls are never a good thing, investors are willing to overlook them, particularly in an industry that is still in its infancy.When you're looking at a stock as a long-term investment, you have to expect some eggs to get broken along the way. Failing forward is forgivable. And with shares hovering around the $2 mark, the potential reward might be worth the risk. But Declining Deliveries Equal Limited Growth PotentialPutting those issues aside, a car company has to sell cars. And Nio is just not doing enough of that for my liking. The company reported delivery of 837 vehicles in July, a number that was down 38% from its June peak. CEO William Li cited the voluntary battery recall as the reason its deliveries plunged. Li also remarked that the company brought some July deliveries forward into June ahead of the subsidy cuts. * The 10 Best Cheap Stocks to Buy Right Now But July deliveries only tell part of the story. As my colleague Laura Hoy pointed out Nio has been reporting disappointing delivery numbers for quite some time. You see, the 38% decline in deliveries since July was on the heels of an underwhelming 1,340 deliveries in June. This was after a disappointing Q1 earnings report largely due to, you guessed it, lower-than-expected deliveries. The Bullish Case Is Becoming Harder to MakeThe bullish sentiment for NIO stock (and other manufacturers such as Tesla (NASDAQ:TSLA) is that the electric car market is a tide that will rise all boats. Put another way, "if you build it, they will come."OK, enough with the cliches.There is no arguing that the electric car market is growing. According to a McKinsey report, global sales for new electric vehicles passed the one million mark in 2017, and the market is expected to grow to 4.5 million cars by 2020. That is approximately 5% of the overall global light-vehicle market. China is unquestionably the leading market for electric cars, surpassing the United States and Europe combined. The Chinese market is also set up with government subsidies and a favorable regulatory environment.With that said, mainstream market adoption is still a way's off for most developed countries. A separate McKinsey study defines four stages of market adoption: * Detectable -- there are faint signals with lots of noise * Clear -- there is emergence of a validated model * Inevitable -- there is critical mass of adoption * New Normal -- the industry is at scale and matureAccording to that same McKinsey study only China and Sweden are even in the second phase of market adoption. And if China is leaps and bounds ahead of everybody else, it's fair to say the market is far from mature.The electric car market can be viable and growing.Nio stock may not be a great investment.Both statements can be true. It's up to Nio to prove otherwise, and that's why their August delivery numbers will be so important.As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post The Future for NIO Stock Is in the Delivery appeared first on InvestorPlace.
The idea of electric cars is not new. In fact, they date back to the 1880's. Over the decades there have been several pushes to popularize them but most efforts had so far fizzled. That is until recently, where Tesla (NASDAQ:TSLA) has made e-cars mainstream. And now other companies are joining the movement, including a Chinese manufacturer called Nio (NYSE:NIO). In spite of the popularity of e-cars, those who owned either TSLA or NIO stock this year are in a world of hurt.Source: Shutterstock The good news is that the global consensus now is that electric cars are here to stay. And that they are a credible threat to the internal combustion engine. While only time will tell, there is a noticeable adoption rate and it seems exponential. We all know at least one person with an electric vehicle or someone thinking about buying one. So the market is viable and that answers the biggest uncertainty in the bullish thesis.Nio stock is struggling, but today's point is that it may just be temporary. If I still own the shares this is not the time to give up on them. Furthermore, this could be a good time to bet on a reversal of fortune for the Nio stock price. The last tactical trade that I was eyeing late July failed to materialize.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThe company got its biggest exposure in the U.S. last year when the TV show 60 Minutes aired a special on it. Consequently Nio stock spiked to $10 per share, but once again, it failed to hold that level. Since then, the stock fell as much as 78% from that high to the low, and it is now slightly above that. Nio Stock Needs Time to HealSo now the bulls are left wondering how low can Nio stock go? Zero, is the answer, but that is true for any stock. So the more constructive question is: How high can the stock go? In other words, does Nio, the company, have a future in the electric car market?Yes, it does. * 10 Undervalued Stocks With Breakout Potential So far, Nio seems to be doing as well as the rest of them. The easy way to illustrate this is to compare its stock price to that of Tesla. Over the last year they have moved in tandem. So this suggests that the stock is broken but the company's prospects and fundamentals are not. And if that's true, then all Nio stock really needs is time to heal.But management could help the cause along by stemming the slide in sales trends. Unlike TSLA which is growing its unit sales, NIO's monthly deliveries are going south. The next earnings report will be pivotal on that front.Meanwhile, the benefit of having Nio stock fall so far from the high is that it's so close to zero that it makes for a small risk with big potential reward. At $3 per share, it makes for an easy debt for the long-term. This is a stock that I would buy and forget about for years or until it spikes. If the e-car market flourishes, then Nio stock is likely to recover most of its past glory.It is also important to note that based on the headlines, the Chinese car market in general is struggling. So this is further testament to the fact that this is not a Nio problem, but rather a industry-swoon. First, you have to consider the general Chinese car industry and, second, the electric car market.This too shall pass. For those who still haven't booked their losses in it, it's perhaps too late to sell this low. * 7 Great Small-Cap Stocks to Buy There's not a lot to discern from the chart other than it looks like grim death. But Nio stock has been setting higher lows for almost two months. In addition it is also setting lower highs and that means the price range is tightening into a fine point. These usually result in big moves, but where it's headed is unknown.What makes this interesting is that this is the same area of the 12 months point-of-control. So from a bull/bear debate, this is where they like to fight it out the most and this creates congestion. So in theory, the bulls have an the advantage and they could break out from this descending wedge.It is entirely possible for the Nio stock price to reach $4 sooner rather than later. There would be resistance there and at every past ledge. But those are also potential triggers for more upside.While this write-up sounds bullish, it is imperative to remember that it's up to the Nio bulls to prove that this company is worth it. So I consider this a highly speculative trade and one that has low odds of success. But the lower the odds, the bigger the potential the rewards. And at $3 per share, it's a relatively small risk that is worth the effort.Last week, the entire stock market took a beating on recession fears. So if this week the headlines cooperate, then Nio stock could start that bounce rally along with a rallying stock market.Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post Nio Stock Is Temporarily Broken, But It's Worth the Risk appeared first on InvestorPlace.
There comes a time for every hedge fund manager when he simply must drop a stock. Not every investment makes money, and the fund manager’s prime directive is to bring in returns for his investors.This is where Izzy Englander can be trusted. The founder of Millennium Management got his professional start in trading in 1977, and established his hedge fund in 1989 with an initial investment of $35 million. After a rough start in the business, Millennium has been wildly successful and now holds over $37 billion in assets under management.So, when Izzy Englander’s hedge sells off a major holding, pay attention.The most recent 13F filing shows that Millennium sold 64,650 shares of Amazon (AMZN) in the last quarter, along with 1,871,684 shares of Nio (NIO), a Chinese electric car company. Amazon is a household name; Nio, not so much. Let’s dive into these two stocks, and find out why Millennium sold down its positions. I’ve Got an Electric Car to Sell You in ChinaOnce billed as “China’s Tesla,” Nio (NIO) is one of nearly 500 electric car companies in China, but more importantly, one of the very few that trades publicly. The company follows an odd business model – while it designs and markets its own vehicles, production is outsourced to state-owned factories. It’s a common practice in China, but it does cut into profit margins. That margin cut is probably the least of Nio’s problems.Higher up on the problem list are the regular losses the company continues to report. This is considered normal for small start-ups, but it still means that investors will have to wait a while to see a return. And that while may turn out pretty long; while analysts are predicting 130% top line growth this year, and 90% growth next year, the analysts don’t expect to see positive earnings until mid-2021 at the earliest. That could, perhaps, be swallowed – but Nio also carries $1.35 billion in debt with only $1.12 billion cash in the bank.And even that might not be the worst of Nio’s problems. This past July, the company delivered only 837 cars. The poor production came after the company had to recall nearly 5,000 of its ES8 SUVs, an action prompted by multiple battery fire incidents.On the positive side, Nio took the initiative in addressing the problem, and solved the battery issues faster than anticipated. Analysts now expect the company to deliver between 2,000 and 2,500 vehicles this month. That’s all good, but July was a warning – no car company can simply shrug off a month like that.That said, there are several factors unique to Nio’s Chinese environment. China’s economy is growing, but the rate of growth is slowing, and structural problems in the debt and real estate sectors do not bode well. There is real demand in China for electric cars, but with hundreds of companies in the marketplace the competition is cutthroat. Nio holds only 2% market share.With all of this, it’s no wonder that Millennium sold 97% of its NIO shares. Still, at least one Wall Street analyst, Bin Wang from Credit Suisse, sees NIO as a buying opportunity. Citing a recent investment in the company by E-Town Capital, Wang writes, “The key catalyst going forward is the successful finalization of E-Town's investment of Rmb10 bn in 'NIO China' to relieve investors' cash flow concerns. We expect management to provide some guidance on this in the upcoming 2Q19 results conference call in end-August.”Overall, however, NIO’s analyst consensus rating remains a Sell. The average price target, $3, suggests a slight 1.3% downside from the current share price of $3.04. (See NIO's price targets and analyst ratings on TipRanks) A Successful Company with Headwinds BrewingAmazon (AMZN) presents a very different investing landscape than NIO, and Millennium treated the share sell-off differently, too. For starters, the hedge fun only sold 38% of its holdings; Millennium still owns more than 100,000 shares of AMZN, worth over $181 million dollars.To start with, the near term is growing a bit more uncertain for the e-commerce giant. A combination of increasing competition, slowing cloud sector growth, and a lack of successful new initiatives may hamper the company moving forward.Amazon was the early adopter in the e-commerce realm, and so benefited from a wide-open playing field. These days, however, every retail company is developing an online presence, sometimes using Amazon as a platform, but sometimes challenging the giant. Walmart (WMT), especially, has been developing an online retail arm with the specific aim of challenging Amazon.E-commerce, however, is not the only crowded sector. In the cloud computer sector, Amazon Web Services has been generating a large part of the parent company’s profit, but Microsoft (MSFT) 365 is backed by the resources of the world’s most valuable public company and AWS will have a hard time maintaining market share.Finally, most of Amazon’s projects in recent years have turned out less profitable than the company would like to admit. The Whole Foods purchase, the online drug store, and the attempted move into health insurance all failed to bring the promised returns, while Amazon’s business in India is recording losses. The company is successful and profitable in its two core businesses, e-commerce and AWS, it’s not about to go under, but it’s having trouble gaining traction in other initiatives.So, it may be fair to say that Millennium’s reduction in its Amazon holding was more of an adjustment – the hedge fund is hedging its bets.The Street’s top analysts, however, still see AMZN as a stock to buy. Both Wolfe’s Scott Mushkin and Jefferies’ Brent Thill put a $2,300 price target on AMZN shares, suggesting a 26% upside potential. (To watch the analysts' track record, click here)In his comments, Mushkin sums up the bullish case saying, “It is not out of character for AMZN to prioritize sales growth over profit when it has the opportunity to improve the customer experience. While the near-term profitability outlook is more subdued, we think it is reflective of the current investment cycle, and our long-term outlook for AMZN’s earnings power is largely unchanged.”All in all, Wall Street’s confidence backing this tech giant is strong, with TipRanks analytics showcasing AMZN as a Strong Buy. Based on 31 analysts polled in the last 3 months, all 31 rate the stock a Buy. Meanwhile, the 12-month average price target stands at $2,284.31, marking a nearly 25% upside from where the stock is currently trading.
NIO (NYSE:NIO) scared off investors when it posted July deliveries that underwhelmed the markets. This sent the stock firmly below the $3.00, a level that could have found support. Instead, NIO stock price traded recently at $2.82.Source: Shutterstock Investors will have to wait for the next two weeks before either committing to the stock or dumping it at a loss. NIO is scheduled to report earnings before the market open on Aug. 27. NIO Stock Fell After Weak July DeliveriesNIO reported that deliveries totaled 837 vehicles in July, consisting of 673 ES6s and 164 ES8s. As investors will recall, the ES6 is a 5-seater premium electric SUV. The ES8 is a 7-seater but also comes in a 6-seater variant.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 10 Stocks Under $5 to Buy for Fall Cumulative deliveries for both models reached 19,727. The company blamed a voluntary battery recall and deliveries pushed forward into June for the weaker numbers. China's unfavorable macroeconomic and auto market conditions remained challenging for NIO. Needless to say, the U.S.-China trade conflict hurt sales. To top it off, NIO faced a declining trend: the drop in passenger vehicle sales on a year over year basis for 13 of the last 14 months.NIO is optimistic that the ES8 battery recall will improve user confidence. With safety and quality assured, the brand will still have a strong reputation that resonates with its customer. NIO is free to turn its attention back to promoting stronger sales.Now that the battery capacity allocation is back to normal, NIO will accelerate deliveries to make up for the delivery loss due to the recall. Management forecasts stronger August deliveries and aims to deliver between 2,000 and 2,500 vehicles. Markets Ignore NIO's ForecastMarkets failed to recognize NIO's delivery number will triple from 837 vehicles in July to as many as 2,500 vehicles. At a share price below $3.00, NIO's market cap is just one-tenth that of Tesla's (NASDAQ:TSLA) market capitalization of $39 billion. So, when NIO is losing just as much as Tesla on an earnings per share basis, NIO stock looks like a stock worth speculating on.Still, markets may see a lesser value in NIO than in Tesla because of its potential for profitability. In the last few quarters, NIO's operating costs grew faster than its revenue. Tesla may see profitability through growing worldwide sales sooner than NIO does.When NIO depends mostly on China for its revenue, investors also face geographic risks. The ongoing U.S.-China trade war sees no signs of ending. Persistent or rising tariffs levied against the country will hurt everyone involved. Since Chinese spending levels are sensitive to the country's economic health, any decline will hurt NIO deliveries. After all, NIO's EVs are premium products that are more expensive than conventional gas-powered automobiles. Longer-Term Prospects for NIOInvestors speculating on NIO stock need to have the conviction that the long-term demand for its vehicles will continue growing. Assuming revenue growth outpacing operating cost growth in the years ahead, NIO will eventually reach profitability. Alternatively, investors who are unsure how the tariff and politics will play out may simply sit on the sidelines for now. In doing so, this group of investors will miss out on any big rally.In sitting on the sidelines, investors just need to wait and see what happens to NIO stock after the quarterly earnings report. More recently, one Wall Street analyst from Merrill Lynch issued a "sell" call and a $3.00 price target of just $3.00 (per Tipranks). And short float is a lofty 22.4%. The Chinese EV supplier clearly has many bears betting against its prospects.Ahead of the upcoming report, the average EPS estimate is a 27-cent loss on revenue of $176.28 million. In the last quarter posted on May 28, NIO reported a loss of 37 cents on revenue of $236.12 million. Your Takeaway on NIO StockInvestors have plenty of China-based stocks trading at sharp discounts. Although stocks like iQIYI (NASDAQ:IQ) and Baidu (NASDAQ:BIDU) are not in the EV space, they are examples of stocks trading at yearly lows. Investors could speculate on NIO and might get rewarded once the trade war ends.For those on the sidelines with NIO stock, buying better-quality names like JD.com (NASDAQ:JD) and Alibaba (NYSE:BABA) is another viable option to pursue.As of this writing, Chris Lau did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post NIO Could Be Worth Betting on at Below $3 appeared first on InvestorPlace.
Nio Inc. (NIO) has disrupted the automotive space since 2014 but only made waves in the market since its IPO. Investors have suffered numerous setbacks.
Chinese electric car maker NIO delivered 837 cars in July, down from 1,340 cars in June. Tesla’s delivery growth range was 110%–221% in the last year.
All 10 companies on this list of the biggest pre-IPO cash guzzlers are either trading below their first day offering price or are out of business.
If you own stock in Chinese electric-car maker Nio (NYSE:NIO), the news that the company's deliveries fell by 38% in July should not discourage you, at least not yet. Source: Shutterstock InvestorPlace - Stock Market News, Stock Advice & Trading TipsAfter all, if Elon Musk had given up after every setback, there would be no Tesla (NASDAQ:TSLA). A stock that goes from $10 to $100 over five years doesn't go straight up. The same is true for manufacturers looking to grow. Peaks and valleys are the norm. Now that Nio's delivery numbers for July are in the books, it's time to look ahead to August and beyond. Does NIO have enough gas in the tank (metaphorically speaking) to keep moving the needle higher?That's the million-dollar question. * 10 Stocks Under $5 to Buy for Fall Here are three things that will help determine whether or not Nio stock is worth holding for the next 6-12 months. The Battery Recall Hurt Nio StockIn July, NIO delivered 837 vehicles, of which 673 were the five-seater ES6, and 164 were the 7-seater ES8. It has now delivered a total of 19,727 vehicles in its brief history, 8,379 of which were delivered in 2019. As a result of a voluntary battery recall on 4,803 ES8s, NIO focused on its battery-manufacturing capacity in July, which caused it to produce and deliver fewer cars. Also, because some electric-vehicle subsidies ended at the end of June, some vehicle deliveries were pushed forward into June, lowering the numbers for July. And to top things off, China's economy has slowed dramatically over the past year. Overall passenger vehicle sales in China have declined year-over-year in 13 of the last 14 months. So, despite several issues working against Nio in July, it still managed to deliver 837 vehicles. August Is Expected to Be StrongerThe good news is that NIO got the battery recall completed in half the time expected, leaving more time for producing cars and getting them delivered to its customers. Nio's CEO and founder William Li expects it to deliver as many as 2,500 vehicles in August, or three times the amount it delivered July. In August 2018, when it only had the ES8, NIO delivered 1,121 vehicles. Therefore, if NIO's deliveries come anywhere near 2,500 vehicles in August, that would have to be considered a significant improvement over this time last year. NIO's business might not be perfect, but it's doing its best to keep the needle moving higher. Tesla Is ComingThe only fly in the ointment for Nio at this point, other than the fact that it loses more than a dollar for every dollar of revenue, is that Tesla likely will start producing Model 3s in Shanghai by the end of the year. And because those Model 3s won't be subject to Chinese tariffs, their prices will drop.Tesla is known for missing deadlines ,so I wouldn't expect the Model 3 to become a headwind for Nio and Nio stock until the first quarter of 2020 and beyond. As InvestorPlace contributor Will Healy pointed out on Aug. 13, Nio faces intense competition. Tesla isn't the only other electric-vehicle manufacturer in China. With only so much demand for electric vehicles, it's possible that Nio won't end up selling many cars, despite the positive reviews of its ES8 and ES6 vehicles. The Bottom Line on Nio StockLast year, when I first covered Nio stock, I was completely cynical about the company because of the large amount of money it was losing. Fast forward to today, and I still believe its financial condition is a major reason to avoid investing in Nio stock. However, I've come to realize that Nio stock is not such a bad investment for aggressive investors, who understand risk and reward very well.Nio stock price is currently trading at $2.85, down from where it was trading in July when I suggested that aggressive investors should consider Nio stock. With Nio stock price at $3 or less, it's an even better bet from a risk/reward perspective, but don't for one minute think NIO or Tesla belongs in your retirement account because they don't. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks Under $5 to Buy for Fall * 5 Stocks to Avoid Amid the Ongoing Trade War * 7 5G Stocks to Buy Now for the Future The post Nio Takes a Step Back in July appeared first on InvestorPlace.
Volatility is par for the course when it comes to newly-minted public companies. But with Nio (NYSE:NIO), the volatility has been even more extreme than is usual. Nio stock just can't seem to get moving, but there are reasons.Source: Shutterstock When the company came public in September 2018, the belief was that the company would somehow be the next Tesla (NASDAQ:TSLA). But unfortunately, Nio stock has been mostly in a grueling downward slide. Consider that since the offering the shares have lost about half of their value.So what's going on here? Why all the disappointment? Well, despite Nio's innovative car models, the deliveries have been subpar. Just look at July, which saw a 38% drop on a quarter-over-quarter basis to a mere 837. That's right. Less than 1,000!InvestorPlace - Stock Market News, Stock Advice & Trading TipsGranted, a big factor was a major recall of close to 5,000 ES8 SUVs. Note that there were incidents of fires erupting from faulty battery packs (there were short-circuits in some because of the wearing down of wires).Now it is encouraging that NIO was proactive and was able to solve the problem in about half the time expected. In fact, the company thinks the impact from the recall is mostly temporary. * 15 Growth Stocks to Buy for the Long Haul The expectation is that August delivers will come to anywhere from 2,000 to 2,500. A big help will likely be the new ES6, which is a five-passenger electron crossover SUV. During July, the delivers came to 673. A Closer Look at NioOK, then is this a bullish signal for Nio stock? Actually, I still think investors should be cautious. Keep in mind that the company still faces considerable challenges. Here's just a few:Competition: While the market in China is large for electric vehicles -- and growing -- there are also about 486 registered manufacturers in the country. Many are fairly small. But of course, there are some large ones like BYD (OTCMKTS:BYDDF) and Beijing Electric Vehicle Co. So it is tough for a company like Nio to rise above the crowd, especially when it has only about 2% market share. Something else: TSLA is gearing up to sell its Model 3 in China during the latter part of the year.Subsidies: The Chinese government has cut back on assistance for electronic vehicles. The main reason is to encourage more competition. But then again, there has also been a reduction in demand, such as for high-priced vehicles.Macroeconomy: While the Chinese economy continues to grow, the pace has decelerated. A big reason has been the U.S.-China trade war, but there are other issues like debt and imbalances, such as in the real estate markets.Business Model: Nio does not manufacture its own vehicles. Instead, the company outsources this to a state-owned operator (Nio did try to build its own plant but has since abandoned the effort). While this helps to lower the capital costs, it does mean that margins are generally lower. Bottom Line On Nio StockThe prospects for EVs are bright in China. But again, the competition is intense and the economic uncertainty will likely remain a big problem.In the meantime, NIO continues to post significant losses. Note that in the latest quarter they came to $366 million. And there is only about $1.12 billion in the bank and the debt is at $1.35 billion.So within the next year, it would be no surprise that the company will do another capital raise - which could be highly dilutive given the low stock price. That is, for now, it's probably best to hold off on NIO stock.Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 15 Growth Stocks to Buy for the Long Haul * 5 More Cloud Stocks With Plenty of Potential * 5 Clean Energy ETFs to Buy for 2019 The post Nio Stock Seems Only to Have Continued Disappointment on the Horizon appeared first on InvestorPlace.
Shares of Silicon Valley's biggest companies fell sharply on Wednesday as the Dow Jones Industrial Average closed out its worst day yet of 2019.
Half of the 34 businesses from the region that debuted on Wall Street in 2018 are now trading below their initial offering price, and three have experienced bigger percentage drops than Bloom.
Nio (NYSE:NIO) is a leading electric-vehicle (EV) maker. It is a Chinese company, but Nio stock trades as an ADR on the New York Stock Exchange. And like some of the other EV makers, this company is having a difficult time facing the challenges that are emerging as the industry matures.Source: Shutterstock Shareholders must be incredibly disappointed as the NIO stock price has lost over 70% of its value since this past March. Many analysts expect the stock to continue to trend lower. The Good, The Bad and the UglyTo be sure, NIO is a company that has a lot of potential, but it is facing some difficult challenges and will probably continue to do so for at least the next few years.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThe good news is that the company is in a promising industry that is benefitting from governmental action. The Chinese government, as well as other governments around the world, are seeking ways to address pollution, and electric vehicles are considered to be a big part of the solution. Analysts expect explosive growth in this industry over the next decade, and that would certainly help companies like NIO. * 15 Growth Stocks to Buy for the Long Haul The bad news is that Nio is losing a tremendous amount of money. In 2018, the net loss was over $1.4 billion. In addition, analysts expect the losses to continue at least until next year.The ugly news is that NIO stock's losses have increased significantly over the past few years. In 2016, losses were $381 million. The losses in 2017 were more than twice as much at $740 million. This is obviously a trend that can't continue forever. No matter how promising the industry is, at some point if the company isn't turning a profit then it will not survive. What's Next for NIO stock?Despite trading sideways or consolidating recently, NIO stock is still in the downtrend that began on July 26th. The forces of supply are still in control of the market.There has been resistance around the $3.25 level. There is resistance here because it was a support level last month. Support becomes resistance because those who sold it at the support level are losing money once the level breaks and the stock goes lower. They tell themselves that if it rallies back up to the level, they will sell it so they can get out of the trade and break even. (Sound familiar?) This sell interest at the level is what creates the resistance.Longer-term, if the stock continues to trend lower look for support around the $2.50 level. These levels were support in June. After they held, a rally of 60% occurred as NIO stock traded all the way up to $4.As of this writing. Mark Putrino did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 15 Growth Stocks to Buy for the Long Haul * 5 More Cloud Stocks With Plenty of Potential * 5 Clean Energy ETFs to Buy for 2019 The post Nio Stock Has Potential, But Will Continue to Face Challenges appeared first on InvestorPlace.
The so-called Tesla (NASDAQ:TSLA) of China, Nio Inc (NASDAQ:NIO), has had a rough go of it over the past few months.Source: Shutterstock Nio stock is down 70% since the beginning of March as the firm faced a variety of headwinds. These range from U.S.-China trade tension to a damaging recall. However, NIO CEO William Li is promising investors that the worst is over. That's led many investors to question whether now is the right time to take a long-term position in Nio stock. Industry HeadwindsOne of the factors keeping the NIO stock price down is the ongoing trade war between the U.S. and China. Chinese stocks as a whole have been under pressure as the Trump administration continues to lean on Beijing. However, as my colleague Luke Lango pointed out, the market seems to be locked in a trade war cycle. While we're on the bottom right now, an uptick could be around the corner.InvestorPlace - Stock Market News, Stock Advice & Trading TipsWhether you believe that or not, it's worth noting that when it comes to trade war casualties, NIO is actually positioned to be one of the luckier ones. As it stands, Nio stock is a Chinese pure-play. The firm doesn't rely on exports or imports to and from the U.S. And that means the trade issues between Beijing and Washington will have a minimal effect on the firm's business. * 7 Safe Dividend Stocks for Investors to Buy Right Now Of course, the Chinese economy may suffer in the wake of the trade tensions. This would almost certainly weigh on the Nio stock price. However, that kind of macroeconomic factor touches all of China's companies as well as most big-name American stocks. So, although it's worth considering, the trade war in itself doesn't look like a major risk to NIO. Vehicle DeliveriesInstead, investors should be looking closely at NIO's vehicle deliveries for a better idea of the firm's future prospects. Back in March, the automaker's share price fell dramatically following its fourth-quarter results. This was largely because vehicle deliveries were lower than expected.Not only was the firm struggling to hit its targets, but its losses were expanding. Furthermore, management broke the news that it would have to abandon plans to build its own factory.NIO's Q1 results were slightly better, giving investors a bit of hope for the future. But deliveries were still a sticking point. To make matters worse, NIO was forced to recall 5,000 of its ES8 vehicles because of battery fires. These incidents appear to have made a significant dent in the firm's summer deliveries.This week, NIO reported just 837 deliveries in July. This is a huge step down from the already disappointing 1,340 deliveries reported in June. Management said its focus on repairing the battery issues was largely to blame for the slide and that its August deliveries should make up for the poor July figures.Li said he expects the firm to deliver between 2,000 and 2,500 vehicles in August. Such a target would put the firm at more than 3,100 deliveries in the first two months of Q3. Make or Break Quarter for Nio StockNIO is due to release its Q2 results in the coming weeks. Although the figures that come out in that report will likely cause a reaction, its August deliveries occupy my focus. The July deliveries raise an important question for investors of Nio stock: is the firm overcoming one-time obstacles or is this decline a trend born out of other factors?That's an inquiry that the Q2 results can't answer.The ES6 model was seen as a major catalyst for NIO. But despite making up the majority of the firm's July deliveries, it doesn't appear to be moving the needle enough. August will prove whether or not the battery fires did permanent damage to Nio's reputation. And without the added stress of replacing batteries, it should give investors a good idea of whether or not the ES6 is all that it claimed to be. The Bottom LineThere's no argument that Nio could be a great long-term play once trade tension subsides, electric vehicles catch on and the Chinese economy improves. However, those conditions aren't likely to materialize anytime soon, at least not all at once.That means investors of Nio stock must keep an eye on the near-term, if only to ensure that the relatively new company can get through it. At very least, NIO needs to meet expectations on August deliveries before it can be considered a buy right now.As of this writing Laura Hoy did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Real Estate Investments to Ride Out the Current Storm * 7 Marijuana Penny Stocks to Consider for Those Who Can Handle Risk * 7 Safe Dividend Stocks for Investors to Buy Right Now The post August Deliveries are Make or Break for NIO Stock appeared first on InvestorPlace.
Shares of Chinese electric vehicle manufacturer NIO Inc. (NYSE:NIO) dropped 2.5% yesterday on what can only be seen as more bad news for the struggling stock. That decline indicates markets were not satisfied with the July delivery data released by Nio. Nio stock was able to recoup those losses today as the U.S. backed off some of its tariff threats in a bid to help domestic retailers ahead of the holiday shopping season. Still, yesterday's decline of Nio stock price in response to the delivery data doesn't bode well for Nio stock going forward.Source: Shutterstock "NIO delivered 837 vehicles in July, consisting of 673 ES6s, the Company's 5-searter high-performance premium electric SUV, and 164 ES8s, the Company's 7-seater high-performance premium electric SUV and its 6-seater variant," according to a statement issued by Nio. "As of July 31, 2019, aggregate deliveries of the Company's ES8 and ES6 reached 19,727 vehicles, of which 8,379 vehicles were delivered in 2019." * 7 Safe Dividend Stocks for Investors to Buy Right Now There's never a good time for bad news, but the downturn of Nio stock came after the shares rallied a bit last month, perhaps giving investors reason to believe a comeback story was in the works. While Tuesday's headlines indicate a potential thaw in US/China trade tensions, and that's good news for Nio stock, the trade conflict has consistently proven fluid and capable of changing based on a single tweet by President Trump.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Digging DeeperAs I've noted in previous columns, NIO founder and CEO William Li is nothing if not ambitious, and he has to be because China is one of the most competitive electric-vehicle markets in the world. But Li has also been forthright about the company's recent struggles, and his comments indicate the selloff of Nio stock yesterday may have been slightly overdone."In July we completed our voluntary battery recall for 4,803 ES8s," said Li in the statement. "During the month, we prioritized battery manufacturing capacity for this effort, which significantly affected our production and delivery results. In addition, some deliveries were pushed forward into June in anticipation of further electric vehicle subsidy reductions that took effect at the end of June."So a case can be made that Nio's July struggles were a one-time event. But on the other hand, because NIO, like its U.S. rival, Tesla (NASDAQ:TSLA), operates in the premium market,Nio stock is highly sensitive to gyrations in economic data and macro forces.In other words, if China, the world's second-largest economy shows signs of weakness, it would be reasonable to expect Nio stock price to sink. For now, though, Nio appears to be bullish about its August deliveries, something that Nio stock may not be adequately reflecting at the moment."Looking ahead, with battery capacity allocation back to normal, we will accelerate deliveries and make up for the delivery loss impacted by the recall," said Li. "We expect August to be a much stronger month, and target to deliver between 2,000 and 2,500 vehicles" The Bottom Line on NIOWhen it comes to Nio stock and its ability to rebound, there are myriad factors to consider and that can be off-putting to some investors. There is the trade war, the devaluation of China's currency, the company's ability to make good on its delivery targets and more. The flip side is that as any of those situations ease, Nio stock price could rebound.Another reason for risk-tolerant investors, and I emphasize "risk-tolerant," to consider NIO is that Wall Street has basically thrown in the towel on the name.Most investors are either ignoring the shares or treat NIO like a candidate for a $1 handle, even though some researchers have a $5 price target on Nio stock.As of this writing, Todd Shriber does not own any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Real Estate Investments to Ride Out the Current Storm * 7 Marijuana Penny Stocks to Consider for Those Who Can Handle Risk * 7 Safe Dividend Stocks for Investors to Buy Right Now The post Nio Stock Is Only Suitable for Risk-Tolerant Investors appeared first on InvestorPlace.
The company recalled almost 5,000 vehicles after an investigation revealed a design flaw in the battery pack.
Investors had high hopes for Nio (NYSE:NIO) stock when it started trading following the IPO of Chinese electric-vehicle maker NIO last September. However, optimism gave way to disappointment quickly.NIO stock price struggled to stay above the IPO price over the next six months before falling to penny-stock status in the spring.Source: Shutterstock Despite a renewed sense of optimism towards NIO, all but the most adept traders will find it challenging to profit from Nio stock.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Safe Dividend Stocks for Investors to Buy Right Now History Bodes Poorly for NIOHundreds of American auto companies have come and gone. Today, only three major auto companies have a headquarters in the United States : Tesla (NASDAQ:TSLA), GM (NYSE:GM), and Ford (NYSE:F).Moreover, investors should remember that even the largest American car companies, including Ford, have declared bankruptcy at some point in their histories. Observers can expect a similar shakeout in the Chinese auto sector.Investors should heed these lessons as China's auto industry grows. Given those lessons, they cannot assume that NIO will avoid bankruptcy. Nio Faces Intense Competition and Needs CashMany like to call NIO the "Tesla of China." However, in reality, numerous companies, most of whom remain privately owned, could credibly be referred to by that title. According to Bloomberg, nearly 500 companies have registered to produce electric vehicles (EV) in China. Meanwhile, NIO has less than a 2% share of China's EV market.Analysts expect NIO, like many other start-ups, to report losses for the foreseeable future. But Nio stock bulls point to the company's expected revenue growth. Wall Street analysts, on average, anticipate that its top line will soar by 130% this year and 90% in 2020. Nonetheless, analysts don't expect Nio's earnings per share to turn positive until at least 2021.However, Nio's revenue growth and the belief that it will eventually be profitable have sparked optimism towards NIO stock. But its long-term prospects remain uncertain, and its losses have taken a toll.The Nio stock price closed yesterday at $3.05, 70 cents above its 42-week low. But NIO has suffered in recent months. After Nio stock price surged to an intraday high of $4 per share in March, I urged investors to treat the rally as a "dead cat bounce," and that's what it turned out to be.In Vince Martin's critique of NIO, he states that the company needs money. Martin speculated that the company could run out of fundsby the end of the year. He also rightly stated that Beijing's decision to reduce electric-car subsidies could take a further toll on NIO. Who Can Profit From Nio Stock?Like most penny stocks with significant revenue growth, NIO stock could potentially be profitable for speculative traders. NIO has an advantage because it's one of the few emerging Chinese EV companies that trade publicly. Moreover,trading around $3 per share, Nio stock could be appealing to traders who remember the move by Nio stock price to $4 per share last month.Still, at best, I believe Nio stock should be a short-term position rather than an investment. With all of the Chinese EV companies and more and more global firms starting to sell EVs in China, investors should worry about Nio's competition.Further, largely due to traffic concerns, officials have at times limited new vehicle sales, particularly in the country's largest cities. Chinese cities have eased those restrictions (for now) amid slowing vehicle sales. However, NIO sold only 837 vehicles in July.When I look at Nio, I see modest sales, losses, and intense competition. Furthermore, even the most established automakers have always had trouble making profits. That has not changed, and it will probably lead to a massive consolidation of China's auto industry.The bottom line is that Nio's ability to survive over the long-term remains uncertain at best. Under those conditions, profiting from Nio stock will probably be quite challenging.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. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Real Estate Investments to Ride Out the Current Storm * 7 Marijuana Penny Stocks to Consider for Those Who Can Handle Risk * 7 Safe Dividend Stocks for Investors to Buy Right Now The post The Outlook of Nio Stock Is Uncertain appeared first on InvestorPlace.
Chinese electric vehicle maker Nio Inc - ADR (NYSE: NIO ) traded lower Monday after the company reported disappointing July shipment numbers . Nio shares are now down 58.8% in the past six months, but ...
It has been a rough year for the Chinese automaker Nio (NYSE:NIO). After reaching its 52-week high in February, the company's shares tumbled to an all-time low in July. Nio stock has trailed around $3 per share ever since and is down more than 50% in 2019. Source: Shutterstock InvestorPlace - Stock Market News, Stock Advice & Trading TipsMany Chinese stocks have taken a hit due to trade war concerns and the country's economic slowdown. But it's not all bad news; China is still the largest global automotive market. Nio is the leading electric vehicle maker in China, so its low price point could provide an attractive entry point for new investors. However, the company reported disappointing vehicle deliveries in July and U.S. trade war tensions with China only seem to be escalating. * 7 Stocks Under $7 to Invest in Now Is Nio a long-term growth stock or should potential investors run for the hills? Here are three things you should know before buying shares of Nio stock. The Electric Vehicle Market Is Poised to Take OffThe global electric vehicle market is expected to grow by 32% by 2025. In 2018, there were 1.5 million units worldwide. That figure is expected to increase to 10.79 million units. This is largely thanks to grants, tax rebates, and subsidies offered by the government. Electric vehicles can help curb the pollution and congestion caused by having a higher number of traditional gas-powered vehicles out on the road. However, China has begun to cut back on these subsidies as the electric vehicle industry becomes more self-sustaining, which could affect Nio's sales and Nio stock. The same thing happened to Tesla (NASDAQ:TSLA) once customers began losing access to the $7,500 tax credit for electric cars. Nio Delivers High-Quality VehiclesNio was recently recognized as having the highest-quality vehicles in J.D. Power's China New Energy Vehicle Experience Index Study. The company beat out competitors like BMW and other Chinese automakers to earn this ranking. This is great news for Nio stock because it gives the company greater credibility with new and current customers.However, Nio recently reported its vehicles deliveries for July and the results disappointed investors. The company delivered 837 vehicles, mostly due to a voluntary battery recall. In June, the company recalled more than 4,800 vehicles due to faulty battery packs. This impacted the company's production and distribution capabilities. Trade War a Temporary Problem for Nio StockWall Street has avoided investing in auto stock in recent months due to trade war concerns. Many automakers are experiencing significant stock declines. And Nio does have several strong headwinds it will need to deal with in the coming year. Regardless, NIO stock is still a compelling stock to invest in. The company will likely experience a slow season that will in turn affect Nio's stock price. Overall, the trade war concerns are temporary and Nio has long-term potential in a growing industry. That makes it a good stock to invest in going forward. As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Large-Cap Stocks to Sell Right Now * 7 Stocks Under $7 to Invest in Now * 7 Marijuana Stocks With Critical Levels to Watch The post 3 Things to Know Before Buying Nio Stock appeared first on InvestorPlace.
It has been a tough week recently for China-based stocks. And NIO (NYSE:NIO), a competitor to U.S.-based automaker Tesla (NASDAQ:TSLA), has undoubtedly been hard hit. After soaring past $10 earlier this year, Nio stock has since slumped to $3.17, in line with the bearish run on all China-based stocks.Source: Shutterstock In fact, Chinese stocks, as represented by the iShares MSCI China ETF (NASDAQ:MCHI) recently closed at $55 and the exchange-traded fund seems headed to its 52-week low of $50, after having topped $60 just last month.So should Nio stock investors be worried?InvestorPlace - Stock Market News, Stock Advice & Trading TipsThe market has hammered all stocks related to China out of concerns of an upcoming trade war and accusations that China has manipulated its currency. No stock has been spared from the selloff.Alibaba (NYSE:BABA) is trading at $162, after having recovered from a steep fall to $152, yet it's still well off its 52-week high of $195. Baidu (NASDAQ:BIDU), now trading around $99, is just at its 52-week low after plummeting from $234 late last year.However, trade war or not, NIO will likely be a survivor and the headline damage could present real value if the Nio stock price gets much cheaper. Three Reasons NIO Stock Is a Long-Term Strategic BuyThe Trade War Will Most Heavily Hit Exporters to the U.S. … Not NIOThe phrase trade war with China is undoubtedly a frightening concept. Understandably, investors will dump any China-based stock. Yet, this is far from any outright war, but rather a readjustment of U.S. import tariffs that will hit China exporters. However, the bulk of NIO's market is in mainland China, one of the world's largest markets for electric vehicles (EV).No doubt, the trade war will weigh heavily on stock prices, and China will be hit. But the Chinese economy will likely remain rock solid. Last Thursday, China reported that its "exports rose 3.3% over a year earlier … rebounding from June's 1.3% contraction." Meanwhile, "[i]mports shrank 5.6% … an improvement over the previous month's 7.3% decline."The figures were mostly better than expected. In short, the Chinese export juggernaut will continue to steam forward. * 10 Medical Marijuana Stocks to Cure Your Portfolio Moreover, threats of a Chinese yuan devaluation and the global economic impact have already hit the market and are well baked into current prices. In most bad news related selloffs, stocks get hit hard at first and are usually oversold. Savvy value seeking investors then step in and bottom-fish for bargains. Similarly, NIO stock, after the sell off, may have been oversold by the market on the basis of an absolute worst case scenario.China Yuan Devaluation Could HelpCurrency devaluation is a two-edged sword. It will make Chinese exports cheaper and more competitive in the U.S. market. At the same time, U.S. exporters to China will have to hike their prices, thus cutting U.S. export sales. However, a devalued Chinese yuan will actually protect domestic Chinese manufacturers, such as NIO, in their home market.Tom Elliott, international investment strategist at Devere Group, a U.K.-based financial advisory firm, said a weaker yuan would increase cost-cutting pressure around the world's manufacturing industries:"Chinese goods, always competitive on price, will be even more competitive … This is therefore bad news for manufacturers outside of China, at a time when global manufacturing is struggling with weakening demand growth and the negative impact of the U.S.-China trade dispute on their supply lines and profits."Translation: A weaker yuan will hurt U.S.-based and non-Chinese manufactures the most. NIO, with 100% of operations inside China, is largely safe. So in the longer run, the Nio stock price might not be in as much trouble as some might think.An Out-of-the-Money, Long-Dated Option On a Hot MarketAt a rock bottom price below $3, NIO stock will be so undervalued as it will be akin to buying an out-of-the-money, long-dated call option. Such an option has zero intrinsic value, but potentially a huge upside if the underlying asset significantly appreciates. The EV market in China is just beginning to take off. EV sales will skyrocket in the next five years, mainly because it is much cheaper to operate an EV than a traditional gasoline-powered vehicle and there's a drive by the Chinese government to cut pollution.NIO commands the size, capacity, market share and evolving product line to make it ideally positioned to leverage the incredible growth of the Chinese EV market. Already, despite its ups and downs, as well as a recently disappointing earnings call, top-line revenues for NIO have increased over 400% from one year ago. * 7 S&P 500 Dividend Stocks to Buy With Yields of at Least 3% The NIO brand was recently ranked highest-quality in J.D. Power's inaugural China New Energy Vehicle Experience Index Study. NIO beat out several competitors, including second-ranked BMW (OTCMKTS:BMWYY). Two Chinese automakers -- Chery Automobiles' Chery and GAC Motors' Trumpchi, both state-owned -- tied for third place in the rankings.There will certainly be some tough weeks ahead for NIO stock as political rhetoric about a trade war with China continues to hammer the market. NIO will also see challenges as the Chinese government reduces subsidies on EV sales.But if Nio stock falls below the crucial $3 level, it will present an excellent opportunity for a long-term hold.As of this writing, Theodore Kim did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Large-Cap Stocks to Sell Right Now * 7 Stocks Under $7 to Invest in Now * 7 Marijuana Stocks With Critical Levels to Watch The post 3 Reasons Nio Stock Will Be a Trade War Survivor appeared first on InvestorPlace.
Chinese electric vehicle maker Nio Inc - ADR (NYSE: NIO ) reported 837 vehicle deliveries July consisting of 673 ES6s and 164 ES8s. As of July 31, aggregate deliveries of the company's ES8 and ES6 models ...
I'm not a big fan of Chinese electric-vehicle manufacturer Nio (NYSE:NIO). That said, I understand why so many people are bullish on Nio stock, despite its incredible volatility. Essentially, it comes down to the idea that EVs represent the future of the automobile, and it may surprise you that I don't disagree with that forecast. However, that future may not arrive for several years.Source: Shutterstock Furthermore, NIO optimists love the company's associated tailwinds. Generally, demand for EVs is very strong in China. The Asian juggernaut already owns the world's biggest automotive market. With a population size four times the U.S., China owns several leading markets. Plus, the country is undergoing its own technology and manufacturing revolution, bolstering the case for Nio stock.Specifically for NIO, the company has tapped into what initially made Tesla (NASDAQ:TSLA) a standout success: its ability to deliver aesthetically appealing EVs that combine practicality with performance. And, while I'm ultimately bearish on Nio, I'll easily concede that its cars are drop-dead gorgeous.InvestorPlace - Stock Market News, Stock Advice & Trading TipsStill, the Nio stock price is down almost 50% year-to-date. Previously, I've argued that the underlying company has a credibility problem. Apparently, neither NIO cars nor the EV industry is ready for prime time. * 10 Stocks to Buy on the Trade War Dip And in the middle of a rising crisis with the U.S.-China trade war, the EV maker looks even more unattractive. Here are three reasons to stay away from Nio stock: NIO's Quality Is UnprovenFor decades, the phrase "made in China" has been a punchline. In fairness, it's a two-sided joke. Western nations demand cheap products, and China willingly supplies them. While overall, Chinese manufacturing has supposedly improved, NIO's longer-term quality remains unproven.Last month, I mentioned that some of the Chinese EV maker's cars had a fatal flaw. According to multiple reports, battery defects have sparked fires. Obviously, that's a distressing risk if you're a prospective buyer. Moreover, it raises questions about the forward viability of the EV sector.I'm also not moved by a J.D. Power report that states NIO scored the highest in new energy vehicle comparisons. The automaker has the fewest problems per 100 vehicles over a two-to-six-month period.Initially, that sounds like a bullish argument for Nio stock. However, using similar criteria, J.D. Power recently listed Hyundai's Genesis, Kia and Hyundai as the highest-ranked brands for new, fossil-fueled cars. Therefore, I'd take the seeming NIO compliment with a grain of salt.Also, the reported problems from EV owners as reported by J.D. Power are quite serious. We're talking slow charging speeds, reductions in mileage and powertrain issues. In summary, both EVs and NIO have much to prove. EV Policies Greatly Hinder Nio StockWith the hoopla surrounding the trade war, you'd think that souring U.S.-China relations would represent the biggest headwind for Nio stock. But that issue, while significant, doesn't come close to the primary problem.As it turns out, both the U.S. and China can agree on something. Both countries are scaling back their policies supporting EVs. With China in particular, changes in automotive licensing render a dramatically negative impact on the Nio stock price.Consider that in the U.S., getting a driver's license is considered a rite of passage. With open roads, a robust economy and access to cheap cars, it's easy for anyone to get up and drive. But that's not how things work in China. Instead, a license-plate lottery means that you may have to wait nearly a decade to get a car.In years past, the Chinese government eased such restrictions for EVs. Naturally, demand for these next-generation cars skyrocketed. However, Beijing is now reversing their stance on fossil-fueled cars. That takes away a huge incentive for buying EVs, especially if you don't have convenient access to electrical power.Of course, this policy headwind is priced into Nio stock. Nevertheless, I don't see how management can overcome this challenge, which leads to my next point. Nowhere to GoHere's where the trade war and the EV policies get tricky for NIO. With the China market fading, management will naturally eye the second-biggest arena. But as I referenced earlier, the U.S. is also limiting their EV support. Specifically, funding for EV-purchase incentives are running out, and there's no rush to replenish them.But even if funding resumed, I've previously argued that we don't have the infrastructure to support mass-scale EV adoption. We just had a heat wave that affected many states' electrical grids. Imagine the stress of both air conditioners and EVs: it could cripple our operational readiness.If somehow we get over that hump, then it must contend with increasingly hostile relations between the U.S. and China. Practically speaking, the U.S. market is off-limits to NIO.That leaves the company with very limited options. Sure, it can market its products in Japan or Europe, but EVs are arguably less practical outside of the U.S.Bottom line: Nio stock was already a troubling proposition without the trade war escalation. With it, I think you're better off avoiding this one.As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Buy on the Trade War Dip * The 5 Highest-Rated Dow Stocks Right Now * 4 Cybersecurity Stocks to Buy for Long-Term Gains The post 3 More Reasons Why You Should Avoid Nio Stock appeared first on InvestorPlace.
China's stocks have struggled tremendously over the past 12 months, as a combination of slowing economic expansion and escalating U.S.-China trade tensions has weighed on profit growth estimates and investor sentiment towards Chinese stocks. That combination has ultimately killed most Chinese stocks. Over the past year, while the S&P 500 is up about 1%, the iShares MSCI China ETF (NYSEARCA:MCHI) is down about 12%.Source: Shutterstock Chinese premium electric vehicle maker NIO (NYSE:NIO) has not been spared from this Chinese stock selloff. Often dubbed the Tesla (NASDAQ:TSLA) of China, NIO has actually been a big underperformer over the past 12, months as China's auto market has dramatically slowed. Since last September, NIO stock price is down about 70%. In 2019, it's down about 50%. * 5 Cheap Stocks to Buy Now That the Fed Cut Rates In other words, there's no sugarcoating the reality; NIO stock price has been killed over the past 12, eight, and five months.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThere's reason to believe the selloff of NIO stock is overdone. Over the long-term, NIO has a ton of potential in China's premium EV market. All that long-term potential is arguably being undervalued by the market today. Thus, one could reasonably argue that NIO stock price can jump tremendously in the long-run,.At the same time, one could also reasonably argue that all that potential is highly speculative, and that NIO hasn't given investors any reason to bet on NIO stock.I see both sides of the argument. That's why I currently look at NIO stock as a potentially undervalued but considerably risky stock. It could turn into a winner in the long-term. But, NIO has to prove that it has what it takes to realize all that long-term potential. As a result, until NIO proves itself, I'll monitor NIO stock from the sidelines. NIO Has Tremendous PotentialThe long-term bull thesis on NIO stock is pretty simple.Electric vehicles are the future of the auto market. China is the world's largest auto market. Electric vehicles (EVs) are also huge in China. Consequently, China is the world's biggest EV market by a mile. Global EV sales volume hit about 2 million units last year. About half of those EVs were sold in China.This market is still in the first few innings of its long-term growth. China is aggressively pushing EV adoption through legislation, since it wants to reduce pollution in its cities. As a result, Beijing is targeting a 20% EV penetration rate by 2025. EV penetration was under 5% last year, meaning that this market has plenty of room to expand in the long-run.The premium end of the EV market, where NIO operates, will grow. The company is a very small player in the total China EV market, as it had a share of less than 1% of that market in 2018. But NIO has a formidable presence and meaningful brand strength in the premium Chinese EV market. Consequently, as the premium EV market expands over the next several years, so should NIO's volumes, sales, margins, and profits.The numbers are easy to digest. Around 30 million vehicles will be sold in China in 2030. It's reasonable to assume that 25% of those, or about 7.5 million, will be EVs.NIO, which presently has an EV share of under 1%, could expand its market share to 2% with new product launches. That implies around 150,000 vehicle sales by 2030. At an average price tag of $50,000, that's $7.5 million in revenues. NIO's gross margins will rise towards 20%. Its operating-spending rate will fall towards 10%, which is average for automakers.After doing the math on that - and assuming a 20% tax rate - I estimate that NIO has the potential to generate $600 million of net profits by 2030. Based on a forward price-earnings multiple of 20, which is average for growth companies, that implies a 2029 valuation target for NIO stock of $12 billion. Discounted back by 10% per year, that equates to a 2019 valuation target for NIO stock of about $4.6 billion. That's 40% higher than today's market cap. NIO Hasn't Proven That It Can Realize Its Long-Term PotentialNIO stock is arguably undervalued by 40% today, and it has a visible pathway to quadruple over the next decade. But NIO stock is undervalued for a reason; NIO stock is highly speculative, and the company has not given investors enough reason to speculate on its potential.NIO started selling cars in June 2018. Things started off on the right foot. In the third quarter of 2018, it sold a very respectable total of roughly 3,600 cars. Its operations really accelerated in the fourth quarter of that year, when NIO sold nearly 8,000 cars. That is the sort of growth surge that gets investors to believe in the long-term potential of a company's business.Consequently, in early 2019, NIO stock jumped above $10.Then, things really started to slow in 2019. In Q1, NIO sold less than 4,000 cars. In Q2, it sold about 3,500 cars. Thus, from late 2018 to mid-2019, NIO has gone from selling 8,000 cars per quarter to 4,000 cars per quarter. That is the sort of growth deceleration that makes investors become increasingly skeptical on the long-term potential of a company.As long as NIO's delivery volume trends remain depressed, NIO stock will similarly remain depressed. As long as that remains the case, investors simply won't have enough conviction in the long-term growth outlook of NIO to "buy the dip" of NIO stock. The Bottom Line on NIO StockBefore NIO stock price rebounds, NIO's delivery volume trends need to reverse course. That could happen in the back half of 2019. Consumption trends in China are starting to rebound, and NIO just released a new vehicle - the ES6 - which could reinvigorate its sales. Consequently, NIO stock price could rebound by a large amount in the back half of 2019.But I'm waiting for proof of this delivery-trend reversal before buying NIO stock. The truth is that NIO stock has been beaten up so much that a delivery trend reversal in the second half of 2019 will spark a huge multi-month rally by NIO stock.By waiting for confirmation of this reversal, investors will miss just one day of the rebound of NIO stock price. But they will simultaneously protect themselves from further declines of NIO stock price in the event the reversal does not materialize.That seems like the best approach at this point.As of this writing, Luke Lango was long TSLA. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Internet Stocks Getting Hammered * 6 Big Growth ETFs to Buy For the Second Half of 2019 * 5 Cheap Stocks to Buy Now That the Fed Cut Rates The post NIO Stock Is Undervalued, But Risky appeared first on InvestorPlace.
Nio Inc (NYSE:NIO) stock has been an under performer since the IPO last September. The stock touched a low of $2.42 in June. A relief rally followed and NIO stock has clawed back 28% to yesterday's $3.09 close.Source: Shutterstock The rally was supported by the company's second quarter delivery update and a temporary bounceback in China's auto sales amidst discounting.However, I remain bearish on Nio stock with macro-economic and industry specific headwinds likely to result in continued cash burn for the company.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThis article will discuss the specific factors that are likely to impact the electric vehicle maker in the coming quarters. EVs EVerywhereChina is in the midst of an economic slowdown and sluggish growth will hit an already-overcrowded electric vehicle sector.To put things into perspective, there are 486 electric vehicle manufacturers registered in China. That's more than triple the number of two years ago.Indeed, the EV industry has grown at a scorching pace in China. However, the senior executive of Beijing Electric Vehicle is of the opinion that only 20 to 30 companies might survive. I do agree with this assessment. * 10 Generation Z Stocks to Buy Long It is worth noting that traditional car manufacturers have also ventured into production of electric cars and that has intensified competition. Big names in the automobile industry have the financial flexibility to sustain the initial cash burn, which can kill smaller players.Another challenge for the local EV companies in China is potential cut in government subsidies. Beijing intends to spur innovation-driven cost decline for electric cars, but the impact is likely to be negative in the near to medium-term. EV manufacturers need to increase the selling price or take a hit on margins.Increasing prices can negatively impact Nio, among other players in the industry.As an example, Nio has SUVs that are priced at CNY 450,000 ($63,877).Tesla (NASDAQ:TSLA) will start production from its China gigafactory toward the end of 2019. The company's Model 3 will have a base price of CNY 328,000.Tesla will also be launching Model Y in 2020 and does not expect its cost of production to be significantly higher than Model 3. Therefore, the popular crossover can be more attractive than Nio SUV in terms of pricing. Cash Burn WorriesNio reported total cash of CNY 4.9 billion as of March 2019. In addition, the company had CNY 2.5 billion in short-term investments. Clearly, the liquidity is not a concern for the foreseeable future, but cash burn is a worry.With current delivery volumes, Nio is unlikely to report positive cash flows. This concern will impact NIO stock as investment in R&D remains high. Even if R&D is excluded, Nio still needs higher sales volumes to deliver positive EBITDA and cash flows.The EV maker also reported short and long-term debt of CNY 9.0 billion, as of March 2019. Therefore, the company has significant debt servicing cost, which adds to the balance sheet stress.With weak credit metrics, Nio is faced with weak market conditions and heightened competition. These factors will put pressure on the stock. Will Nio Get Caught in Consolidation?A natural course of progress in the Chinese EV market will be toward merger and consolidation in the industry.Nio has a market capitalization of $3.25 billion and the company still looks expensive considering that there is no free cash flow visibility.However, if NIO stock continues to trend lower, there can be a potential case of the company as an acquisition candidate. * 10 Cyclical Stocks to Buy (or Sell) Now There was news that Daimler and BMW are looking at joint production of EV in China to save money. The joint platform could potentially save $7.85 billion for each car maker. However, as the report states, brand dilution could be a concern for BMW.I believe that bigger players will consider acquisition of beaten-down manufacturers as a relatively cost-effective way of making an entry in the Chinese EV market.My acquisition view is speculative, but likely in the next 12-24 months as margin pressure takes a toll on Nio. Bottom Line on Nio StockNio stock is likely to remain sideways to lower as headwinds of economic slowdown, competition and cash burn weigh on the company's outlook and credit health.Considering the crowd of EV manufacturers in China, consolidation is the way forward and Nio can potentially be a good acquisition target sometime down the line.As of this writing, Faisal Humayun did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Buy on the Trade War Dip * The 5 Highest-Rated Dow Stocks Right Now * 4 Cybersecurity Stocks to Buy for Long-Term Gains The post In China's EV Bubble, Nio Stock Straddles Line Between Target and Victim appeared first on InvestorPlace.