Nio stock forecast: Here’s the crucial price to watch

Nio (NYSE: NIO) stock price has remained being under fire as concerns about the company’s growth continue. The shares rose to $8.25 after its latest earnings, as I had predicted. It then resumed the downtrend as traders reflected on its deliveries and thinning margins.

Nio earnings download

Nio is a giant Chinese electric vehicle (EV) company that has long been compared with Tesla, the biggest manufacturer in the world. The firm sells several vehicle models like EC6, ET5, and ET7, which have a good market share in China.

Nio, despite its challenges, is still one of the fastest-growing EV companies in the world. It delivered over 55k vehicles in the third quarter of 2023, up from 31,607k in the same quarter in 2022.

Its total revenue jumped by 45.9% to over $2.6 billion while its vehicle margin rose to 11%. However, its total gross margin dropped by 12.2% to $208 million. The company also recorded a big loss during the quarter. Total loss jumped to over $624 million. 

Nio’s management believes that it can continue to narrow its losses in the coming quarters as it ramps up production. It is also set to acquire a production facility from JAC, one of the leading manufacturers in China. 

JAC, a state-owned company, already plays a part in manufacturing all of Nio’s models. By owning this equipment, Nio hopes to cut costs by about 10%, which will help it to expand its margins. It has also announced another round of layoffs.

Another positive thing is that Nio’s balance sheet has improved despite the substantial losses. It ended last quarter with over $6.2 billion in cash and equivalents, which is half of its total market cap. 

The biggest issue for Nio is the current state of the Chinese economy and the EV sector. While recent data has shown that the economy is recovering, the real situation is relatively worse than expected. The biggest issue is in the highly leveraged banking sector, as Kyle Bass noted recently.

The other issue is that the Chinese EV market is quite saturated, with companies like Byd, Li Auto, and Xpeng manufacturing millions of vehicles every year. This trend will likely lead to more price cuts soon.

Nio stock price forecast

NIO chart by TradingView

Turning to technicals, we see that the Nio share price has been in a tight range in the past few weeks. It has remained between the support at $7.04 and the resistance at $8.50. The stock has failed to moved below that price since June this year.

It has consistently remained below the 50-day and 25-day Exponential Moving Averages (EMA) and the descending red trendline. Therefore, at this stage, more downside will be confirmed if the stock moves below the support at $7. If this happens, the next point to watch will be the psychological level at $5. 

On the other hand, a move above the descending trendline will point to more upside as buyers target the support at $9.