NIO (NYSE:NIO) stock’s been on a downward spiral since the start of 2021. The electric vehicle (EV) manufacturer was once lauded to be the next big thing but has experienced struggles along the way, causing some investors to throw in the towel on this share. So is there any growth potential left that makes it worthy of consideration?
Why the battery’s low
First, it’s important to understand why the share price has performed poorly despite operating in a growth sector. The 28% fall over the past year can be put down to three main reasons. To begin with, competition in the EV space has ramped up. On top of other specialist EV firms like Tesla, NIO’s been competing with more traditional car makers pivoting to offer customers a hybrid of full EV options.
Another influence has been a poor financial performance. Back in November, the quarterly results showed a net loss of $710m, up from the loss of $639m from the year prior. This was also worse than analysts’ expectations. If a business can’t make a profit for a continued period of time, it doesn’t bode well.
Finally, NIO’s a Chinese company, headquartered out of Shanghai. The broader problems with the Chinese economy has hindered progress, with some investors steering clear of the stock as they saw it as a bellwether for the economy.
Optimistic outlook
But there could be significant growth potential left in NIO shares. For a start, production numbers are increasing. At the start of this month, the company released more information on delivery numbers for last year.
For December, 31,138 vehicles were delivered, a jump of 72.9% versus the same month in 2023. When we consider the year in total, 221,970 vehicles were delivered, an increase of 38.7% from 2023. This shows demand’s increasing, pushing revenue higher.
This could indicate that if the firm can keep a lid on costs going forward, making an annual profit might not be too far away.
Another factor’s the low share price. At $4.36, it’s close to the 52-week lows of $3.61. Below that and I have to look back to 2020 to find it at a similar level! On the other hand, it traded at $67 in 2021. So based on past performance, there’s an argument to be made that there’s certainly growth potential there.
The bottom line
Of course, past performance doesn’t indicate future returns. But when I consider that the company’s growing, I think it’s only a matter of time before financial results improve. It’s true that the EV space is competitive, but based on the potential market size, there’s plenty of money to go around. As a result, I think NIO could be a smart buy for investors to consider at the moment.
The post Is there any growth potential left in NIO stock? appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
More reading
Is it time for me to buy more shares around £4 in this FTSE 100 banking giant after the government reduced its stake?
3 FTSE 250 shares to consider for a brand new Stocks & Shares ISA!
£30k to invest? Here’s one way to target a near-£65k second income in retirement
£20k ISA? Here’s how that could generate £574 a month of passive income!
3 high-yield shares that could help set a SIPP up for decades
Jon Smith owns shares in Tesla. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
