In current weeks, traders have began to change into charged up once more about China-based electrical automobile firm Nio (NYSE:NIO). Sentiment for NIO inventory has shifted again to optimistic, leading to a speedy transfer for shares again to double-digit costs.
A number of current developments have performed a job in getting the inventory again on an upward trajectory, however considered one of them stands out as the principle cause behind this reversal.
That may be upbeat statements from Nio’s CFO, which counsel the corporate may report robust progress beginning later this 12 months.
Nonetheless, earlier than operating out and shopping for the inventory on these daring statements alone, it might be greatest to scrutinize the scenario. Sure, there are some elements that help the “progress comeback” narrative. There’s an enormous issue that factors to future disappointment as an alternative of continued exuberance from now till the tip of the 12 months.
How NIO Inventory Re-Entered the Quick Lane
All through January, February and early March, loads of detrimental information weighed on Nio shares, together with a number of consecutive underwhelming month-to-month deliveries experiences and a disappointing quarterly earnings launch.
Currently, although, the headlines relating to NIO inventory have been of the optimistic selection. As an example, information of the corporate’s plans to launch a trial operation for deliberate high-speed EV battery swapping stations.
But what’s been the most important little bit of perceived optimistic information about Nio lately hasn’t been from an organization announcement or information headline.
Slightly, it has emerged from remarks made by Nio CFO Steven Feng in a March 21 interview with Bloomberg Tv.
Feng said that the corporate is “very assured” about hitting its 2023 gross sales goal of 250,000 autos, greater than double final 12 months’s determine.
Once more, there may be substance to Feng’s daring assertion. Feng cited the forthcoming launch of latest automobile fashions together with the corporate’s battery swap and self-driving know-how, as elements that would allow Nio to hit this objective. Whereas the market agrees with this argument, I don’t. Right here’s why.
Unplugging the Bull Case
Given the elements talked about by Nio’s CFO in his current statements, plus different positives resembling the tip of China’s stringent Covid-19 restrictions, it’s straightforward to see why many are assured within the rising bull case for NIO inventory.
However whereas new automobile fashions, improved applied sciences, and a extra favorable financial surroundings all sound just like the recipe for a progress renaissance, there’s an enormous detrimental that will counter all of them.
That may be intensifying competitors within the EV area, towards the backdrop of an anticipated slowdown in EV gross sales progress this 12 months.
Tesla (NASDAQ:TSLA) hasn’t been the one EV maker slashing costs in China. Native Chinese language automakers like BYD (OTCMKTS:BYDDF) Xpeng (NASDAQ:XPEV), and even Nio itself have additionally applied value cuts.
This value battle doesn’t essentially imply gross sales progress for Nio will likely be nonexistent in 2023. Nonetheless, it might restrict the extent through which gross sales progress re-accelerates.
Decrease automobile costs additionally name into query whether or not Nio can attain breakeven standing by subsequent 12 months.
This was one other milestone that Feng hinted was a risk for 2024. Margin issues have cooled, however may once more rise, moreover pressuring the inventory.
The Takeaway
It’s up within the air whether or not Nio proves the skeptics fallacious. These holding bearish views on Nio might be confirmed proper as soon as once more, as they have been in 2022.
As you could recall, the corporate final 12 months promised a late-year progress restoration. Though exterior elements prevented this from taking place, Nio’s previous of over-promising and under-delivering ought to make one skeptical.
That stated, as I argued a couple of weeks again, it’s higher to attend for additional developments that bolster the bull case. An excellent instance could be upcoming month-to-month deliveries knowledge.
One other good instance could be extra information relating to the variables that supposedly differentiate Nio’s automobile choices from the competitors (particularly, the swappable battery characteristic).
Till then, proceed to wait-and-see with NIO inventory.
On the date of publication, Thomas Niel didn’t maintain (both immediately or not directly) any positions within the securities talked about on this article. The opinions expressed on this article are these of the author, topic to the InvestorPlace.com Publishing Pointers.
