NIO (NIO.US) is a leading Chinese manufacturer and seller of electric cars and one of Tesla's (TSLA.US) main competitors.
The company has suffered a huge sell-off in recent times. The weak condition of the stock has been influenced by the return of negative sentiment towards the Chinese stock market, which has slipped below the 2020 lows, and a decline in the company's business momentum. The company's shares are down nearly 10% today.
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile app- Problems with supply, chip availability and production are weighing on the valuation and the future growth of NIO's business;
- Company sold 25,034 cars in Q4 2021, up 44% year-on-year, slightly ahead of the Q3 2021 figures;
- The company's posted wider than expected quarterly loss, and a decline in Q1 2022 deliveries is also evident.
- The company is losing despite a busy schedule of events this year that includes the debut of new car models, including the ET7 and ES7 luxury sedans, due to debut in Q3 2022. Deliveries of the ET7, which aims to be a main competitor to Tesla's Model S, are due to start as early as 28 March,
- Domestic competition is clearly 'nipping at NIO's heels, with two domestic concerns Li Auto and Xpeng overtaking NIO in January and February this year;
Deutsche Bank analysts, however, point to the possibility of a reversal of the bearish scenario for the company. According to analyst Edison Yu, "(...) Revenues are on track to increase from 10,000 per month to 25,000 by year-end, which will result in a shift in narrative from supply constraints to a product cycle".
At the same time, China appears to be more resilient than Europe to possible shortfalls in the global commodity crisis. This was pointed out by Volkswagen, among others, which recently prioritized China due to the European supply chain crisis caused by Russian aggression in Ukraine. At the same time, the return of COVID in China has recently projected problems with industrial production due to the Chinese government's 'Covid zero' policy of restrictive lockdowns.
NIO (NIO.US) shares have plunged in recent months, however this week buyers managed to break above the upper limit of the downward channel which coincides with the upper boundary of the 1:1 structure. Nevertheless, the upward move turned out to be short-lived and price pulled back after bulls failed to break above 50 SMA (green line). During today's session price returned below the upper limit of the channel. If current sentiment prevails, downward move may accelerate towards support at $14.78. Source: xStation5
