NIO Stock Analysis: Why ‘Buying the Dip’ Could Be a Big Mistake

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Nio (NYSE:NIO) has slid back to single-digit prices, but check your NIO stock analysis before jumping in at today’s multi-year lows. Shares in the China-based electric vehicle manufacturer may be cheap but it’s debatable whether they are a bargain. There are reasons why the stock now trades at low prices.

That’s not to say a Nio recovery is impossible. After all, with the stock back at levels last hit right before the start of the early-2020s EV stock boom, it may not take much in the way of operational improvement to drive one. However, based on the facts, not only does a rebound appear very questionable. Further price declines are not out of the question.

Nio Stock: Not at Zero, but No Longer a Hero

Four years ago, NIO went from near zero to EV stock hero, as electric vehicle proliferation took off in the company’s home market, resulting in a strong surge in sales growth.

But since 2022, between the impact of China’s Covid lockdowns, and the post-lockdown sluggish recovery of the Chinese economy, sales growth has slowed down considerably. Operating losses have increased, causing new-capital raises and shareholder dilution.

Hence, while not at “zero,” NIO stock has long since lost his hero status. Once trading for prices above $60 per share, the stock now trades for around a tenth of this high-water mark.

Some bottom-fishers may sense opportunity if current perceptions of this EV stock being a lemon prove too short-sighted. Unfortunately, no matter how much one may hope for such an outcome, it remains difficult to be confident about this happening.

For instance, based on the latest Nio vehicle delivery data, the company is most definitely not in recovery mode. During January, deliveries fell 44.2% compared to December. That’s not all. There are other factors that are keeping me bearish in my NIO stock analysis.

More Growth and Profitability Challenges Ahead

Sure, maybe it’s not fair to judge Nio’s prospects, simply because of poor delivery performance during one particular month. I’ll also concede that the EV maker has big plans for 2024, including the launch of a lower-priced vehicle brand in China (Alps). Nio also has plans to launch a lower-priced brand (Firefly) for the European market in 2025.

Yet while Nio hasn’t given up on becoming a larger force in the global EV market, I wouldn’t assume these big plans guarantee a big recovery.

Far from cooling down, China’s EV price wars are still heating up. Large players in the Chinese EV industry can afford to keep going on the offensive.

For Nio, however, this means it’ll have to go further on the defensive, by lowering its own vehicle prices in response. This could outweigh the positive impact of increased vehicle production/sales, leading to continued low gross margins, and high operating losses/cash burn.

In short, it’s reasonable to assume in our NIO stock analysis that shares are at risk of another round of declines. If lackluster sales and high losses persist, forget about shares merely languishing. Instead, count on NIO experiencing another round of price declines.

NIO Stock Analysis: Stay Out of the Way!

As I recently pointed out, it’s possible that Chinese Government intervention is helping to provide support for NIO stock. However, this short-term fix will only last so long. Eventually, this “intervention” will dry up.

This, coupled with investors becoming further disheartened by the company’s poor fiscal performance, not to mention disheartened by the prospect of continued shareholder dilution via capital raises, could send shares sinking back to their 52-week low ($5.30 per share). Or worse, down to prices deep in “penny stock territory,” or under $5 per share.

With this in mind, there’s one clear takeaway from the latest NIO stock analysis: still a falling knife, and in no way a bottom-fisher’s buy, stay out of the way!

NIO stock earns a D rating in Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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