It’s widely known by now that the EV sector is experiencing a downturn. The basic issue is that demand has cooled while competition has been heating up, affecting companies both big and small. It’s a tough environment to deal with and sentiment amongst investors toward EVs has been rather bearish.
Some, though, have suffered more than others and you can certainly add Nio (NYSE:NIO) to that group. With an alarming 56% decline in Nio shares year-to-date and the stock now trading below $4, investors are confronted with a critical decision: either run a mile or consider loading up on a stock that’s down but not out yet.
Investor Oakoff Investments comes down on the side of the latter group. Oakoff concedes the negative sentiment is down to tangible concerns – the company has been delivering less vehicles than previously anticipated, showing a drop in growth against rising competition while margins have dipped, and it remains unprofitable. Those are risks investors should consider, naturally even more so if Nio does not show improvement on any of those fronts. But Oakoff also sees reasons why the company can turn things around.
First off, it is in a strong financial position, boasting approximately $7 billion in cash and cash equivalents according to the latest financial report with the recent $2.2 billion strategic investment from CYVN Holdings having notably bolstered NIO’s cash balance. And should Nio keep expanding its battery swap infrastructure in China, Oakoff believes it will possess ample resources “for further scaling.”
Additionally, the company will be unveiling a new mass market brand in Q2, set to launch in Q3 with the wider release kicking off in Q4. While margins won’t see improvement here, it should help fuel growth.
As such, Oakoff thinks “nothing is over for Nio” quite yet. “Despite the major risks surrounding NIO, I believe that the company has growth prospects, as its direct costs should fall as the operations scale up and sales should increase once the firm starts delivering new models,” Oakoff explained. “The company is under tremendous competitive pressure, but being in the luxury electric car segment (a rather narrow, undercovered niche) and developing battery swap technologies, I think NIO has every chance to significantly increase its market capitalization in the next few years.”
To this end, Oakoff rates Nio shares a Buy. (To watch Oakoff Investments’ track record, click here)
On Wall Street, Nio gets similar attention from the bulls and skeptics, with the shares receiving 7 Buys and Holds, each, and with the addition of 2 Sells, the stock claims a Moderate Buy consensus rating. There are plenty of gain projected here; at $6.92, the average price target makes room for 12-month returns of ~77%. (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.
