Top Growth Stock: NIO Inc. (NIO)- 6.14

Please note this is only an opinion and not financial advice. Direct stock investing is subject to business and market risks. Therefore, it’s highly recommended to do proper risk management and your own due diligence before investing.

Growth Stock Analysis as of 17 February 2024

Top Growth Stock

NYSE: NIO Inc. (NIO)

• Established in 2014, NIO Inc. (NYSE: NIO) is a Chinese company focused on designing, manufacturing, and selling smart electric vehicles in the premium segment. Additionally, they offer power solutions, maintenance services, and financial leasing options.
• NIO has seen a notable drop in its stock price despite efforts to expand battery-swapping infrastructure and enhance profitability through partnerships.
• Despite achieving record production and indicating further growth in 2024, NIO’s stock has plummeted to $6.
• In Q4 2023, the company delivered 50,045 vehicles, slightly below the Q3 records; however, this figure exceeded prior records by 10,000 vehicles.
• NIO Power is a mobile internet-based power solution with extensive networks for battery charging and battery swap facilities. Enhanced by Power Cloud, it offers a power service system with chargeable, swappable and upgradable batteries to provide users with power services catering to all scenarios.
• NIO intends to extend its production into sub-brands to penetrate the lower-cost vehicle market and estimates that it commands over 40% of the ultra-premium market. Despite numerous growth opportunities ahead, the stock trades only slightly above 1x sales.
• NIO Inc. (NYSE:NIO) struggles due to Chinese economy and EV market concerns. Despite record production in 2H’23 and plans for expansion into sub-brands in 2024, the stock slumps to $6.

Shareholding Patterns of NIO Inc. (NIO):

NIO’s cars models:

What we think are pros of business:

1. NIO ended 2023 strong with 18,012 vehicle deliveries in December, marking a 13% increase from November’s 15,959 deliveries.
2. NIO faces challenges with declining long-term vehicle margins due to shifts in product mix and strategic decisions for price stability, despite solid growth.
3. NIO continues to allocate over 20% of its revenue to SG&A and R&D, while COGS represents more than 95%.
4. NIO is expected to benefit from the recent investment from the Abu Dhabi fund and a more accessible global monetary environment.
5. NIO’s impressive smart vehicle lineup, highlighted by the new ET9 sedan, coupled with improving financials, indicates potential for sustained growth and profitability.

What we think the risks are:

1. Despite rising deliveries, NIO’s stock has underperformed compared to the broader market in recent months. Additionally, the company’s bottom line continues to face challenges.
2. The company is expected to continue burning cash at an unsustainable rate and diluting its shareholders simultaneously.
3. The biggest issue facing NIO is that a huge deficit exists between the gross profit just topping $200 million.
4. Negative publicity, product recalls, or controversies can harm brand reputation and customer trust.
5. As competition in the Chinese EV market intensifies, NIO encounters challenges in competing with companies of similar scale, let alone industry giants like Tesla or Mercedes-Benz.

Fundamentals:

• Market Cap: 12.79 Billion
• Revenue: 54.58 Billion
• 52 Week Range: 5.3 – 16.18
• EPS: -1.77
• Rev Growth (YoY): 26.61%
• Beta (5Y Monthly): 1.98

Technical for a long-term perspective:
– Stock is trading at multiyear support levels and preparing for the big bounce from current levels.
– The current levels is a past breakout levels where buyers are attracted and prices shoot up to sky from these levels.
– There is a small yellow trendline resistance on the upside so price may try to reverse form that levels.
– You can book profit near yellow trendline and create new position at lower prices for the big breakout.
– If you want to trade with high confirmation then you can plan to enter only above its Moving average levels. Its MA will also acts as a small resistance.
– There is a small chance of pullback again, which you can take as an opportunity to add more stocks at lower levels.
– Don’t book profit early, you can ride the profit with trailing Stoploss for bigger targets.
– You can hold this trade for final targets of 49-50 which may be achieved in next 8-10 months or 1.5 year maximum.
– RSI is turning bullish and trading flat for now and it will shoot up higher towards 50& 70 levels.

Entry = 6

Stop Loss = 2

Target = 34 / 49

Our Final Thought:

NIO faces challenges in a competitive Chinese EV market but is building a strong brand. Its stock has been impacted by economic weakness and underperformance, with concerns about overvaluation. Investors bullish on NIO’s long-term potential may consider accumulating shares cautiously. Margin expansion and sustained delivery growth will be crucial for NIO’s future success. As of now, I rate NIO as a ‘buy’ with some risks involved.Increased competition in China’s EV sector poses challenges for NIO, especially in its path to profitability. Demonstrating profitable vehicle production and sales is crucial for NIO’s stock to see significant growth.

Please note this is only an opinion and not financial advice. Direct stock investing is subject to business and market risks. Therefore, it’s highly recommended to do proper risk management and  your own due diligence before investing.

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