Nio stock price forecast: rebound faces elevated risks ahead

By:
on May 2, 2024
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  • Nio’s shares have rebounded by over 46% from their lowest level this year.
  • The company reacted to the encouraging news from Tesla, the biggest EV company.
  • It announced strong April deliveries but it faces significant risks.

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Nio (NYSE: NIO) stock price has rebounded sharply in the past few days as sentiment in the electric vehicle industry improves. It continued bouncing back on Wednesday after publishing encouraging delivery figures. It has soared by over 46% from its lowest level this year.

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EV sentiment has improved

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Nio, the well-known Chinese EV company, is benefiting from the recent price action of Tesla. Tesla shares have rebounded by almost 30% from the lowest point this year after Elon Musk made a trip to China. China then agreed to allow the company’s self-driving features.

Tesla also announced that it was focusing on a more affordable vehicle as it seeks to regain its market share in the US and other countries. In the aftermath of these events, most EV companies like Rivian and XPeng have bounced back.

Nio stock continued rising after the company announced its April vehicle deliveries. It delivered 15,620 vehicles in April, a 134% increase from the same period in 2024. It has now delivered over 495k vehicles since inception.

Nio is hoping to continuing its growth by launching more vehicle models. It has already launched ET7, a premium electric sedan that is becoming popular in the country. Also, the company has partnered with Lotus Technology, a company building luxury vehicles.

Still, Nio faces major challenges as the EV industry shows signs of slowing down. While Tesla has made some good headlines recently, the reality is that the company published weak financial results as its revenue dropped to $21 billion. Its profit dropped by 55% to $1.1 billion.

These numbers mean that other companies, including Nio and XPeng will face these headwinds. Also, there is a likelihood that its margins will continue narrowing as EV companies slash prices. Just last month, Nio announced a $4,200 price cut across all its models in a bid to boost market share.

The other challenge is that the Chinese EV market is highly saturated, with companies like BYD, Li Auto, and XPeng seeking to gain market share. The same trend is happening in Europe, where companies like Volkswagen and Stellantis have well-known brand names.

Meanwhile, there are signs that hybrid vehicles are growing at a faster pace than electric vehicles. A recent report in Europe showed that plug-in hybrid sales rose by 12% in February while battery electric vehicles jumped by 10.3%.

Nio stock price forecast

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Nio stock

NIO chart by TradingView

Turning to the daily chart, we see that the Nio share price has staged a strong comeback in the past few days. It has rebounded from the year-to-date low of $3.55 to a high of $5.27. 

Along the way, it has risen by above the 50-day moving average while the Money Flow Index (MFI) is nearing the overbought level of 80. The Average Directional Index (ADX) has moved above 20, signalling that it has a bullish momentum.

I believe that these gains will not last because of the significant risks mentioned above. If this happens, it will likely retreat and retest the crucial support at $4. Still, the alternative scenario is where it first rises to $7 (June 2023 low) and then resumes the bearish trend.

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