Is turmoil surrounding Tesla (NASDAQ: TSLA) spilling over to NIO (NYSE: NIO)? Does NIO’s latest warning portend further share-price declines? There are no easy answers to these top-of-mind questions. Nevertheless, I am bullish on NIO stock as financial traders have seen every glass as half-empty, and bearish sentiment has reached an extreme level.
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Nio is a well-known China-based electric vehicle (EV) manufacturer. Developed nations across the world have made various commitments to support clean-energy movements, including vehicle electrification. Knowing this, some investors bought NIO stock in hopes of easy gains.
As it turned out, there were no easy gains in 2022. A confluence of challenges in China and elsewhere, along with collateral EV-market damage from Tesla’s troubles, have put NIO stock in the doghouse this year. Yet, from the depths of despair, an epic resurgence can emerge in 2023, and Nio’s loyal investors may be handsomely rewarded for their patience.
Don’t Punish All EV Companies for Elon Musk’s Eccentric Behavior
Is Tesla CEO Elon Musk brilliant, an oddball, or both? I’ll let you decide for yourself, but it’s no secret that Musk likes to stir the proverbial pot with his controversial statements. This may help to explain the extreme volatility in Twitter (when it was public) and Tesla shares, but Musk’s antics shouldn’t cause sensible financial traders to dump NIO stock.
As you may recall, Musk posted a poll on Twitter asking whether people thought he should leave his post as CEO of that company. The majority of responses said yes, and Musk plans to step down as Twitter’s CEO as soon as he can find a replacement for that position.
This incident might prompt some investors to question Musk’s leadership ability. Is he stable enough to run Twitter and Tesla? As investors pondered this question in late 2022, TSLA stock declined sharply, and since it’s a bellwether EV stock, it dragged NIO stock down with it.
Personally, I relish the opportunity to pick up stocks that have suffered collateral damage. Musk’s unpredictable nature has nothing to do with NIO, but some traders apparently went ahead and panic-sold their NIO shares. If you believe in buying what amateur traders are selling, this is a chance to buy NIO stock near the bottom of its 52-week range, which is $8.38 to $33.80.
Nio’s Warning Sets Up for a Relief Rally Next Year
From time to time, companies will warn their shareholders in order to get the bad news out of the way. It’s discouraging when this happens, but value hunters should consider not selling their NIO shares. Instead, they can view NIO’s cautionary tone as a chance to take a long position, as the next data release might be better than expected.
Musk is sometimes known for his boastful demeanor. In contrast, NIO’s management took a humble and cautionary tone in its latest update. The press release admitted that NIO has been “facing challenges in deliveries and productions, together with certain supply chain constraints” due to the Omicron COVID-19 strain’s spread in China.
Consequently, NIO has been unable to reach its “full capacities” in terms of EV deliveries. More specifically, the automaker lowered its fourth-quarter 2022 vehicle delivery estimate from the previous range of 43,000 – 48,000 to 38,500 – 39,500.
NIO stock dropped after the release of this revised outlook. Many traders seemed to ignore the positive news that Nio’s “EC7 and the All-New ES8” EV models are “expected to commence delivery in May and June 2023, respectively.” The company already unveiled these exciting vehicle models as part of NIO Day 2022, which took place on December 24.
Even while retail traders hastily sold their NIO shares near the 52-week low, analysts are fairly optimistic about the stock’s future prospects. So, let’s see how they rated NIO.
Is NIO Stock a Buy, According to Analysts?
Turning to Wall Street, NIO stock comes in as a Moderate Buy based on nine Buys and four Hold ratings. The average Nio price target is $16.29, implying 63% upside potential.
Conclusion: Should You Consider NIO Stock?
With zero Sell ratings and the potential for substantial gains over the next 12 months, NIO stock should be on every EV-industry investor’s radar. There’s no need to let the soap opera surrounding Musk deter anyone from standing by NIO for the long term. Expect some volatility for a while, but consider dipping into NIO shares at a reduced price while amateur traders are anxious for all the wrong reasons.
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