Nio Inc. (NYSE:NIO) saw its shares soar to record highs in 2021, fueled by low interest rates, social media hype, and a strong fear of missing out (FOMO). However, when interest rates began climbing, investors steered away from speculative stocks, causing Nio’s share price to nosedive.
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Now, with interest rates expected to decrease and the Chinese government preparing a $325 billion stimulus package to boost the domestic economy, could these developments give Nio stock a much-needed lift?
For investor Bohdan Kucheriavyi, the answer is a definitive no.
“NIO remains unprofitable, burning cash, and facing rising geopolitical risks, making it hard to achieve a turnaround without outside financing,” the 5-star investor opined.
Although Kucheriavyi recognizes Nio’s rising revenues and vehicle deliveries, the company’s financial health remains a concern. He highlights that despite revenue growth, Nio has seen little improvement in its bottom line. In Q2, the company reported a net loss of $705.4 million, with cash reserves falling from $5.32 billion to $4.99 billion quarter-over-quarter.
“Considering that profitability is expected only in 2027, the company will continue to lose money. However, given the weak margins and constant downward revisions, there’s a possibility that NIO will not even break even in 2027,” Kucheriavyi noted.
According to the investor, Nio would have already gone bankrupt if not for “constant liquidity injections” from external investors. While this funding has kept the company afloat, it dilutes the value of existing shares and makes Nio a less appealing investment.
On top of all these issues, rising geopolitical threats are making the landscape for Chinese EV makers even more difficult, writes the investor.
Kucheriavyi points out that both the U.S. and European Union are raising barriers to enter their markets, while the Chinese government has also decided to prevent its carmakers from exporting advanced EV tech.
These pressures will force NIO to compete in the increasingly crowded Chinese domestic market, placing another large obstacle on the road.
“It makes no sense to invest in NIO for the long term at this stage as the prospects look grim,” concludes the investor, who rates Nio a Hold. (To watch Kucheriavyi’s track record, click here)
The views on Wall Street are slightly more optimistic. With 8 Buy, 4 Hold, and 1 Sell ratings, Nio stock holds a Moderate Buy consensus rating. Its 12-month average price target of $6.31 would imply gains of some ~23% in the year to come. (Watch 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.
