Nio Stock Is Likely To Quickly Rebound From Current Sell Off

NIO: Nio logo
NIO
Nio

Nio stock (NYSE:NIO) has declined by close to 23% over the last week (five trading days) and remains down by almost 46% over the past month. While the U.S. markets have seen a bit of a recovery in recent days, Nio and other Chinese EV players have been weighed down by multiple factors. Firstly, China’s Xi Jinping consolidated power at the recently held Communist party meeting, taking over a third five-year term as President. Investors have been concerned that this could mean that increasingly strong state control over the Chinese economy and markets will continue, potentially impacting stock returns. Moreover, there are also concerns about the Chinese economy amid issues in the over-leveraged property sector, which was a big driver of growth in recent years. The Chinese government has delayed the release of key economic indicators and this could be a sign that things remain tough, translating into a tough outlook for automotive companies. Although EV sales have remained a bright spot, demand could be softening with EV bellwether Tesla recently cutting prices on its vehicles in China by as much as 9% over the last weekend.

Now Nio’s fundamental performance has actually been pretty strong in recent months. For the third quarter, the company’s delivery growth rate has actually picked up, coming in at 29% year-over-year with total deliveries coming in at 31,607 units, well above the average 25,000 vehicles that it delivered over the last four quarters. Nio has also fared better than rivals Xpeng and Li Auto, which actually saw their deliveries decline sequentially in Q3. Nio is also increasing its focus on the European market. While it entered Norway in 2021, it recently said that it would start delivering vehicles in Germany, Denmark, the Netherlands, and Sweden as well, and this could help the company drive additional volumes.

We think that Nio stock could be poised for a recovery in the near term. Based on historical data, Nio has seen returns of -46% or lower over a 21-day period on 18 occasions over its four years as a publicly listed company. The stock has risen over the next 21 days in 13 of these 18 instances, which translates into a roughly 72% chance of rise in Nio stock.  See our analysis on Nio Stock Chance of Rise for details.

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Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 NIO Return -40% -70% 48%
 S&P 500 Return 6% -20% 70%
 Trefis Multi-Strategy Portfolio 2% -25% 197%

[1] Month-to-date and year-to-date as of 10/25/2022
[2] Cumulative total returns since the end of 2016

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