<p>Shares in Chinese electric car maker Nio (NYSE: NIO) showed some signs of life in January, but did not last. Following a pattern that investors have become very familiar with, the NIO share has fallen 33% since 21 January.
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It has decreased by 65% in just over a year after hitting $ 10.06 on March 1, 2019. Is Nine due to a recovery, with the potential to ride an electric car wave in honor?
Maybe in the long run. But there are many things that must go right for Nine.
Bad news continues to accumulate on Nio
Nine was no stranger to bad news in 2019. You can check out this post for the crises the company faced up until September. From there, the situation continued to deteriorate. The nine-share has not taken such an assault for no reason.
Among the latest examples of bad news for Nine, Tesla (NASDAQ: TSLA) opened its first Gigafactory in China last fall. On December 30, the first Model 3 cars rolled off the line for delivery. Tesla is now a much more formidable competitor to Nio in the luxurious Chinese EV market.
Coronavirus from China has had a measurable impact on Nio’s sales. The company says it delivered only 1,598 vehicles in January. That is 11.5% compared to the year before, and a dramatic decline compared to the 3170 it delivered in December.
In the latest news to rock the EV market, General Motors (NYSE: GM) presented on Wednesday Ultium, the company’s new modular electric platform. With an investment of $ 20 billion, Ultium is expected to be the basis for a new generation of GM electric vehicles.
In 2019, GM experienced its second straight year of declining car sales in China. Ultium could see that the company looks to reverse that trend by appealing to buyers of electric cars in the Chinese market.
There was some of the latest good news for NIO – even though it was linked to coronavirus. In late February, the company announced a cash injection from the city of Hefei (capital of China’s Anhui province). In exchange for establishing a new headquarters in the city and expanding its partnership with local suppliers, Nio will receive $ 1.4 billion.
Bottom row of Nine warehouses
So, what are the prospects for us to see Nio recover and the NIO stock once again approaching the high levels of 12 months ago?
It’s a tough conversation with some pretty significant variables.
Will the coronavirus pick out or develop into a complete pandemic that is hampering the global economy? Will the trade war between the United States and China cool down? Will China’s economy (and new car sales) pick up speed after last year’s record slowdowns? Will Tesla eat at Nio’s market in a big way? Will GM’s new Ultium electric cars lead to a comeback in the American carmaker’s faltering sales in China?
There are many balls to juggle. The investment analysts surveyed by The Wall Street Journal are taking a wait-and-see strategy. They have Nine as a consensus “hold”. Their 12-month price target of $ 4.06 does not reflect much confidence in the growth of NIO stocks (it is about 9%).
InvestorPlace’s Matt McCall has a much more optimistic view of Nio’s prospects, especially in the longer term.
“It has almost ridiculous upward potential. Furthermore, NIO conducts its trade in the world’s largest car market. With a rising Chinese middle-class meeting at home grown, beautiful cars, the story is extremely positive, “he wrote.
If your attitude towards Nio is in line with the current, cautious, wait-and-see approach, the fact that NIO has dropped 65% in just 12 months (after peaking the $ 10 level in March last year) is more ammunition. Like the fact that the shares of the company have slipped 33% from their 2020 peak of 5.17 dollars, set on January 20.
If you agree with Matt’s assessment – and there are analysts who have NIO ranked as a “buy” and a 12-month price target approaching $ 13 – the NIO stock at its current price is a bargain. However, keep an eye on these variables as any of them have the potential to have a meaningful impact on where NIO goes from here.
At the time of writing, Brad Moon had no position in any of the above securities.