NIO (NYSE:NIO) shares are down 73% over the past 12 month. There are several reasons behind the collapse. However, the company’s long-term viability is not one of them.
Falling share price
Like other tech stocks, NIO became very expensive during the pandemic. In early 2021, the company had a market cap around $100bn. That’s absolutely huge, especially for a firm that was delivering around 20,000 cars a quarter.
The falling share price can be attributed to two events, largely beyond NIO’s control.
Firstly, 2022 started with a tech sell-off, prompted by a surge in US Treasury yields. This impacted growth stocks more than value stocks, as the former are valued on future revenue expectations.
However, the performance of Chinese EV stocks has been impacted further by the nation’s Covid-19 policy. Lockdowns have hampered production and the supply chain, but the threat of more restrictions has served to prevent upward movement in the share price.
More recently, and perhaps less importantly, is the formation of President Xi Jinping’s new cabinet — composed entirely of loyalists. To some, the new cabinet represents a move towards autocracy, and that’s rarely a good thing for business.
Why I’d buy now
In the long run, I’m not too concerned about China’s Covid policy. I’m hopeful that the government will continue to reduce restrictions over time, as is the case elsewhere in the world.
And it’s worth noting that NIO’s performance has improved throughout the year as Covid restrictions were incrementally relaxed.
In Q3, NIO’s vehicle sales jumped 38.2% year on year, generating around $1.68bn in revenue. Moreover, the company delivered 10,059 vehicles in October 2022, representing a massive 174.3% yoy increase.
This accelerated pace of growth is expected to continue in Q4. Nio expects to deliver between 43,000 and 48,000 vehicles in the months to December — this would represent yoy growth of around 71.8% to 91.7%. Revenue for Q4 is expected between $2.4bn and $2.7bn.
The company’s growth is once again resembling that of Tesla. And there are more positive signs. Auto sales in China increased by 6.9% yoy to 2.51m units in October of 2022. Meanwhile, full electric cars accounted for 22% of new car sales in the Chinese market during the month.
I’m also impressed by NIO’s EV offering. The Shanghai-based firm has six models on sale — more choice is normally positive for sales. The vehicles are packed full of the latest tech and feature unique battery-swapping technology, allowing drivers to swap empty batteries for full ones in a matter of minutes.
The latest Et7 even has a range of 1,000 km, the firm says. That puts the Chinese firm ahead of Tesla –although testing standards do differ.
I believe NIO has a very positive future ahead of it. And, right now, its valuation looks very attractive. NIO currently trades with a price-to-sales ratio of around 2.8, far less than Tesla at 7.5. I already own NIO shares, but because of the above, I’m buying more.
The post I’m buying NIO shares as its growth enters a Tesla-esque phase! appeared first on The Motley Fool UK.
5 stocks for trying to build wealth after 50
Markets around the world are reeling from the current situation in Ukraine… and with so many great companies trading at what look to be “discount-bin” prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…
We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.
Claim your free copy now
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
Could buying NIO stock now be like buying Tesla in 2019?
Should I buy NIO stock after it rocketed back above $11?
At $10, are volatile NIO shares worth the risk?
3 reasons why I’m tempted to buy NIO shares
Up 23% in a week, is now the time to buy NIO stock?
James Fox has positions in Nio Inc. 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.