While February brought a seeming sector-wide recovery, and certain players in the industry such as BYD – which recently reached a massive milestone of 7 million vehicles produced – are decisively in the green in 2024, this year – and much of 2023 – has been fairly bad for electric vehicle (EV) makers in general.
Elon Musk’s Tesla (NASDAQ: TSLA) took much of the attention as it became one of the worst-performing S&P 500 stocks this year, but other firms – American and Chinese – have likewise been struggling.
Nio Inc (NYSE: NIO) in particular appears to have hit a rough spot as, having dropped to $4.78 by the latest stock market close, the EV maker hit a new 52-week low and is at the lows not really seen since its 2020 rally.
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Is $1 next for Nio stock?
The fact that the ongoing downtrend already made Nio shares fall approximately $56 from their highs – and to half their value during the initial public offering (IPO) – leaves the impression the company might be decisively heading toward $1, or possibly lower.
Analysts are certainly losing their appetite for the Chinese EV maker as the number of “neutral” ratings has been mounting just as 12-month price targets have been falling.
Mizuho’s Vijay Rakesh was only the latest in the long line of experts to slash their expectations as he lowered the yearly forecast from $15 to $5.50 – from a 213% upside to 15%.
Why is Nio stock falling?
Many of Nio’s woes can be attributed to what can be described as a perfect storm of adverse conditions.
Chinese stocks have, in general, been struggling after a 3-year $7 trillion stock market wipe and have only recently started a slow recovery. There has, also, been an overall slowdown in demand for electric vehicles with sales remaining significantly below previous forecasts.
The so-called EV winter has been, in fact, severe enough that multiple traditional car makers – such as Ford (NYSE: F) – have scaled down on their electric vehicle production and BYD’s offering of hybrid models – for which the demand has been greater – might be a major contributing factor for why the company’s stock is doing comparatively well.
Finally, Nio’s situation is not helped by the fact that most of its models are fairly expensive making it difficult to retain and increase market share when there is no lack of competition, but a shortage of customers is persistent.
In the long run, however, the situation is likely not as bleak as it appears. Nio is widely regarded as one of the most technologically advanced and one of the highest quality EV makers in China, and, as the broader global economic situation improves, it is probable it will regain its footing, and some stock market ground.
Nio stock price chart
While it is tough to tell if Nio will eventually collapse to $1 or less, or climb to old all-time highs above $60, it is clear that the company has done little other than decline in recent months.
In the last 52 weeks, Nio stock dropped 46.47% – and its latest closing price of $4.78 is its lowest in the 12 months – and the decline continued into 2024 as the shares are also 43.23% in the red year-to-date (YTD).
Prices have been falling strongly in recent months – along with the fact that there is, at press time, no clear support level – rendering taking new long positions on Nio highly risky as a renewed strong drop could theoretically send it to previously unseen lows.
More recent trading brought little room for optimism as the stock is 17.30% down in the last 30 days, and fell 6.64% in the latest full week. Finally, Nio found itself 2.65% in the red at Tuesday’s close and dropped another 0.84% in the extended session by press time.
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