Nio targets a booming market for electric cars. The Chinese EV startup aims to double sales in 2023 with a new and expanded product lineup, after overcoming big operational challenges. Is Nio stock a buy?
Nio News
On March 1, Nio gave a disappointing quarterly earnings report and outlook. However, its EV sales rebounded strongly in February vs. January, a promising sign after a string of supply-chain and execution issues.
On March 24, Nio CFO Steven Feng said the company is "very confident" about doubling sales this year. He cited new EV models, Nio's charging and battery swap network, and its self-driving technology.
Founded in 2014, Nio went on to deliver booming sales. In 2022, Nio grew EV sales 34%. In 2021, Nio more than doubled EV sales. Those gains came despite pandemic-related supply disruptions both years.
The startup is sometimes called the Tesla of China because of its sleek, high-tech, premium EV designs.
Nio is reportedly mulling a mass-market EV brand, which could grow its user base.
The company runs a battery rental business and plans to make its own battery packs from 2024.
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Nio Stock Technical Analysis
The China EV stock remains below the 50-day/10-week moving averages, with no buy point in sight for now. It's even further below the longer-term, 200-day/40-week averages.
In fact, the 10-week line for Nio stock has languished below the 40-week line for more than a year, reflecting the significant challenges faced by this once-hot EV maker.
The relative strength line shows serious lag. It rallied sharply in the second half of 2020. A rising RS line means a stock is outperforming the S&P 500 index. It's the blue line in the chart shown.
Nio stock ripped higher in 2020 on expectations for huge sales growth, but peaked in January 2021. Since then, it has plunged for various reasons, including pandemic-related supply disruptions that hurt EV production and sales.
The IBD Stock Checkup tool shows that Nio shares earn a dismal Composite Rating of 15 out of 99. The rating combines key fundamental and technical metrics in a single score.
An RS Rating of 7 means Nio has outperformed 7% of all stocks in IBD's database over the past year.
Nio Earnings And Fundamental Analysis
On key fundamental metrics, Nio lags. It's a young and growing company, still looking to turn a profit.
Nio stock earns a worst-possible EPS Rating of 1 out of 99. The EPS rating compares a company's earnings growth vs. other companies.
Nio holds an SMR Rating of D, on a scale of best A to a worst E. The SMR Rating is a combined measure of sales growth, profit margins and return on equity.
On March 1, Nio disclosed a worse-than-feared, per-share loss of 44 cents for the fourth quarter, despite a 50% revenue jump. For the full year, Nio lost $1.06 per ADR share, while revenue grew 26%.
In 2023, analysts polled by FactSet expect Nio to lose $1.04 per share. But revenue is seen jumping 68% for the full year.
Nio plans to grow its product lineup this year from six EVs to eight. It's also expanding in several European markets.
Out of 33 analysts covering Nio stock, 23 rate it a buy and nine have a hold. One has a sell, FactSet shows.
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China EV Market
Nio targets China's market for premium electric vehicles. Its EVs are priced higher than Tesla's vehicles, especially after the U.S. EV giant cut prices twice in recent months.
While Nio's ET5 rivals the Model 3, its newer models will challenge the Model Y further.
Nio, as well as XPeng and Li Auto, are startup rivals to Tesla in China.
Chinese EV and battery giant BYD is another major player, moving up toward Nio's affordable luxury and premium segments.
China is the world's fastest-growing EV market, but fiercely competitive.
Volkswagen, General Motors and Ford also sell electric EVs made in China for Chinese consumers.
By 2030, EVs will make up 90% of new car sales in China, Nio CEO William Li forecasts.
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Is Nio Stock A Buy Now?
The Chinese EV startup continues to lose money while enjoying enviable sales growth.
Nio is seen as a credible Tesla challenger in years to come, with strong brand power in China and a small foothold in international markets.
But the EV wars are heating up. A possible global recession could be a setback for EV adoption and sales.
This once-hot EV stock eyes a long road to recovery after sinking over the past two years.
Bottom line: Nio stock is not a buy right now. However, Nio sales are seen improving mightily in 2023 on the back of several new EV models, so check back for updates.
To find the best stocks to buy or watch, check out IBD Stock Lists and other IBD research.
