We all know that investment is a game changer in building wealth. But that’s only when you know how to play it right. EV is the new wave in the automobile industry; that’s why a company like NIO is a possible investment idea. The company is targeting the growing EV market and has been releasing new models to thrive in the increasing competition. Their stock movement over the years has been interesting, especially the volatility in the last few months. 2020 was a great year as their stock grew above a thousand per cent. However, the market went against them the next year, and now in 2022, the stock experienced ups and downs, from getting down as low as $12 in May to rising beyond $20 at the time of this blog. Now that the stock has bounced back, is it the right time for investors to consider getting in? We have the answer for you in this blog based on some metrics and detailed analysis. Ensure to stay calm and read till the very end.
If any investors are excited about NIO stocks, it’s probably because of the outlook performance of the company. At the end of 2021, NIO gave an account of more than 10,000 car deliveries which signifies around fifty per cent improvement on the previous year’s delivery. Some analysts project around 68 per cent growth in vehicle deliveries year in and year out. This optimism about growth in the outlook is a very attractive baseline for investors.
NIO has also taken a brilliant step ahead of its competition with its innovative battery-changing system. In the space of five minutes, vehicle owners can now swap batteries in the company charging station. This compensates for the time required for charging other EV vehicles and gives them an edge in the EV market.
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What’s more? The EV is the new wave of automobiles, and the market is still hot. Analyst predicts that around 8 million electric car sales in China alone by 2025. On top of that, NIO is currently spreading its wings beyond China. They entered Norwegian in 2021 and are currently expanding to Netherland, Denmark, Sweden, and other countries in Europe. Although competition will continue to rise, NIO innovation, especially the battery-changing technology, can help them stay relevant. Analysts also believe that the frequent launching of new models is good news for NIO sales. If they remain competitive, their stock might turn a bear in the long run. These are good metrics that are appealing enough for a stock.
On the other hand, let’s take a look at what’s happening on the cons side of investing in NIO stocks.
Still yet to turn out a profit
NIO reported a second and third quarter of 835 and 587 million net loss last year. This is projected to increase to 2 billion dollars by the end of 2022. Even though the future might look bright, the current surge in inflation will put NIO at a more expensive edge to borrow the capital required for business growth as they are yet to turn a profit. Let’s see the final cons on our list today.
Uncertainty in regulation
2021 was not a good year for Chinese stocks under the hands of China and United States regulations. Chinese regulators have thrown the book at fintech, education, and internet companies. Although the automobile industries have been evading their hammer, investors are still sceptical about the government’s next action. Similarly, the United States Securities and Exchange Commission has also come up with new audit regulations and is ready to remove Chinese stocks that don’t comply with them. This, among other reasons, placed a huge question of dilemma in the minds of investors.
Global economy situation
Nevertheless, the backend of the stock might not be as interesting as you might expect. The current level of the global economy is not welcoming. The pandemic, coupled with the Ukraine-Russia war, had kept inflation surging continuously without any hope of coming down any time soon. This put NIO at an extreme disadvantage. Inflation sucks the value of a company’s future earnings, and that’s not good news on their side. On top of that, governments are increasing interest rates to slow inflation growth. This means that investors can now make higher gains on less risky assets. You know how it goes; why risk on stocks when you can make good money playing it safe? That’s how many investors are thinking right now, which is going to put NIO stock price in bull condition should the interest rate keep rising.
Is this the right time to buy?
NIO is such an interesting stock to follow, especially with the innovation that keeps them relevant in the surging EV market competition and the current and potential growth of the company. Unfortunately, with the continuous rising of inflation and government measures of increasing interest rates, there will be slow progress in the growth of NIO and other growth stocks. So, it’s not advisable to buy at the current price of around 21 dollars.
If you love what you learn from this blog, please hit the like button to let us know. It would also be best that you also signup to our newsletter to get more tips and strategies to win in the stock market and create financial freedom for yourself. Based on current and future analysis, do you think NIO stock will boom sometime in the future? The comment section is the place for your detailed answers.
Recommended books for further reading:
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits
- The Stock Market Investing Guide #2020: From Beginner to Intelligent Investor within 30 Days – How to Save Money, Generate Passive Income and Reach Financial Freedom
- Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage
- Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week
- Investing Demystified: How to create the best investment portfolio whatever your risk level
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