Nio stock price forecast: buy the dip or sell the rip?

By:
on Jun 10, 2024
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  • Nio reported another big quarterly loss of over $700 million last week.
  • The company’s revenue dropped by 7.2% from the same period in 2023.
  • It faces significant challenges as the EV industry continues its slowdown.

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Nio (NASDAQ: NIO) stock price’s plot thickened after the company published another set of financial results. It crashed to a low of $4.83 last week, bringing the year-to-date losses to 46.75%. It has also plunged by over 37% in the past 12 months, meaning that investing in the S&P 500 index has generated a better return.

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Nio is facing huge challenges

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Last week’s financial results showed that the company was facing substantial challenges as competition rose. 

Nio delivered 30,053 vehicles in the first quarter of the year, a big drop from the 31,041 it delivered in the same quarter in 2023. 

Subsequently, the total revenue dropped by 7.2% to over $1.32 billion during the quarter. At the same time, its gross margin came in at 4.9%, lower than the 7.5% it made in the last quarter of last year. 

Altogether, the company’s loss from operations stood at $747 million while the net loss jumped by almost 10% to $718 million

Nio hopes to restart its growth path by using two main strategies. First, the company hopes to gain market share abroad, especially in Europe. This is an important move now that the Chinese domestic market has become highly saturated, with brands like BYD, Huawei, and Tesla vying for market share. 

The challenge of this is that some foreign governments are uncomfortable with China’s domination of the EV industry. In the US, the government has announced a 100% tariff on Chinese EVs while Europe is debating how to safeguard its domestic industry. 

Second, the company is looking to launch more models in a bid to boost its market share. It recently launched ONVO and L60, vehicles that it hopes will become popular among buyers in the country. In line with this, the company hopes to deliver between 54k and 56k units in the second quarter, a big increase from what it delivered last year.

Nio stock price analysis

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Nio stock

NIO chart by TradingView

Now, the question is what to expect now that Nio is facing significant headwinds. Some analysts believe that the market is being highly negative on the stock. Besides, the company sits on over $6.3 billion in cash against its market cap of about $10 billion. It has also pointed towards strong delivery metrics.

Other analysts believe that the company faces an uphill battle now that the industry has become highly saturated and that margins will continue thinning in the coming years. Also, the company is incinerating huge sums of money as its net loss in the quarter stood at over $718 million.

Turning to the daily chart, we see that the Nio share price’s attempts to rebound faded when it rose to a high of $6 last month. Recently, it has crashed below the key support at $5 and moved below the 50-day and 100-day Exponential Moving Averages (EMA). That is a sign that bears are in control for now.

Therefore, the short-term outlook for Nio is moderately bearish, with the next point to watch being at $4. In my view, I suspect that it will make sense to buy the Nio shares when bulls push it above last month’s high at $6. 

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