Everyone loves a good turnaround story, and it would be a welcome development for Nio (NYSE:NIO) right now. Shares of the Chinese EV maker have been on what seems like a never-ending downtrend, the slide being a multi-year affair, while in 2024 alone, the stock has slipped by 48%.
However, if you’re eyeing a turnaround and mulling over picking up shares on the cheap, it might be worth holding out a bit longer. That at least is the opinion of top investor JR Research, who thinks the “pain might not be over, with the market potentially dismantling NIO’s broken growth story further.”
The waning confidence among investors, JR argues, stems from Nio’s recurrent failure to deliver on its promises, as evidenced by recent developments. On its early March Q4 earnings call, Nio guided for Q1 deliveries in the range between 31,000 and 33,000 vehicles but before the month was out, that figure was lowered to around 30,000 vehicles. “Therefore,” says JR, “NIO’s overpromising and underdelivering ways of 2023 have reemerged, as NIO’s final Q1 deliveries of 30.05K vehicles missed even the low end of its initial Q1 guidance.”
JR also points out that when Nio’s CEO William Li was asked about meeting the report’s stated 200,000-unit target for 2024, he refrained from offering a full-year target. What he did say, however, was that competition is expected to be “intense.” That is a statement JR agrees with and which actually offers more food for the bears.
Already operating in a highly competitive domestic market, the recent entry of Xiaomi into the EV game has only complicated matters further, having “intensified competitive headwinds for NIO.”
NIO’s reliance on the domestic EV market to “drive scale” is another potential problem, with JR believing the company is unlikely to push more aggressively into the European and US markets due to “geopolitical headwinds.”
With the growth story souring and investors “left baffled by NIO’s inability to chart a clear path toward profitable scale,” JR recommends staying on the sidelines for now, maintaining a Hold (i.e., Neutral) rating on NIO shares. (To watch JR Research’s track record, click here)
Turning now to the analysts’ view, where NIO stock claims a Moderate Buy consensus rating, based on a mix of 7 Buys recommendations, 7 Holds, plus 2 Sells. Most analysts seem to think the shares have dropped too far; going by the $6.92 average price target, a year from now, investors will be sitting on returns of 48%. (See Nio stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
