NIO stock has halved. Time to make a killing?

NIO (NYSE: NIO) has fallen an extended, great distance. In 2021, NIO inventory bought for greater than $60 apiece. At the moment, the worth is beneath $5.

The share value has halved up to now 12 months, although the five-year decline sits at a extra modest 8%.

Nonetheless, after the steep fall and with NIO now buying and selling near costs final seen in 2020, might it’s time for me to pile in to the shares and attempt to make a killing?

Macro considerations, micro considerations

NIO isn’t the one electrical car maker to have seen a pointy comedown in share value these days.

Rivian has greater than halved up to now in 2024 and is now over 90% decrease than it was 5 years in the past. Even Tesla has tumbled 31% this 12 months, though it nonetheless sits a powerful 862% increased than it did 5 years again.

Clearly, there are some issues affecting investor sentiment concerning the sector usually.

These embody rising competitors pushing down promoting costs and hurting revenue margins (NIO stays loss-making, not like Tesla). Transport disruptions are additionally complicating provide chains, probably including prices and delays.

On prime of that, NIO inventory is probably going affected by some company-specific considerations too. It introduced this month that first-quarter deliveries have been round 30,000, round 3% under the identical stage within the comparative quarter final 12 months. Tesla deliveries within the quarter confirmed a worse year-on-year decline (9%) however it nonetheless shifted virtually 13 instances as many autos as NIO.

For a corporation of NIO’s dimension and unprofitable economics up to now, declining gross sales are a priority. If that development continues, it could possibly be unhealthy information for revenues and significantly for profitability.

NIO’s first-quarter web lack of $690m was 166% increased than within the prior-year quarter.

Enterprise mannequin considerations

I believe that helps clarify why the inventory has slumped.

The corporate stays badly loss-making and is burning money.

In the meantime, gross sales development could have stalled, for now no less than. Traders appear fearful that the economics of the enterprise are unattractive. The enterprise mannequin has not but confirmed that it may be constantly worthwhile.

If the corporate continues to burn money, it might dilute present shareholders by issuing new shares to boost cash. That might additional damage the NIO value.

Potential fork within the highway?

Nonetheless, checked out positively, would possibly we now be at an inflection level?

Slower gross sales development and revenue margin strain might result in a shakeout within the trade. Which may assist the prospects of well-established producers equivalent to Tesla and NIO.

NIO will not be rising gross sales nicely, however it’s nonetheless shifting a few thousand vehicles per week. It has constructed a premium model and affords battery-swapping expertise I believe helps set it other than rivals whose autos are successfully tied to charging stations.

Primarily based on that, NIO inventory in the present day might change into an actual cut price. Shopping for now, I’d make a killing in years to return if the enterprise grows gross sales and cuts or eliminates losses.

I want to see extra proof of that earlier than investing, nevertheless. So for now no less than, I cannot be shopping for NIO inventory.