The electric vehicle (EV) stock Nio recently hit a 52-week low, presenting a low-cost opportunity for investors, but there are several important factors to consider.
Nio’s stock, traded under the ticker symbol NIO, had risen by 12% by February 18, leading investors to believe that the EV maker’s shares had reached their lowest point. However, this optimism was short-lived as the stock reversed its trend, reaching a 52-week low, and concluded March with a 17.7% decline, according to S&P Global Market Intelligence.
Several factors contributed to the decline of Nio’s stock. A decline in deliveries, increased losses, and a share sale exerted pressure on the stock in recent weeks. Although Nio’s delivery figures, announced on March 1, showed a significant year-over-year increase of 62% in February, they decreased by 4.8% compared to the previous month. While deliveries under Nio’s flagship brand improved by 15% over January, the company’s mass-market sub-brand, Onvo, experienced a 32% sequential drop.
Furthermore, Nio reported a record net loss of $974 million for the fourth quarter, a 33% increase from the previous year, despite a 13% rise in vehicle sales. Although Nio’s gross margin improved to 11.7% in Q4 from 7.5% in the same period the previous year, higher operating expenses, due to increased spending on marketing, new brands, and sales network expansion, affected the company’s profits.
A subsequent announcement by Nio also impacted the stock. Near the end of March, the company revealed its plan to sell approximately 136.8 million shares through overseas transactions at a price of 29.46 Hong Kong dollars per share, representing a steep discount of 9.5% compared to the prior day’s closing price on the Hong Kong stock exchange. Consequently, Nio’s stock price fell to a 52-week low of $3.57 on March 31.
Nio’s focus on sub-brands is a significant part of its growth strategy. Onvo started delivering its first model, the L60 SUV, in September 2024, with plans to launch the second model, the L90, in the near future. Despite the drop in Onvo’s deliveries in March, it remains to be seen whether this trend will reverse in the coming quarters, especially considering the traditionally weak season for auto sales around the Chinese New Year holiday. Meanwhile, Nio’s second sub-brand, Firefly, is set to launch its first model, a compact hatchback, on April 19.
Nio’s guidance remains promising, with expectations to deliver between 41,000 and 43,000 vehicles in the first quarter, indicating a year-over-year growth of approximately 36% to 43%. The company’s Q1 revenue forecast also suggests potential growth of between 23% and 30% compared to the previous year.
Nio’s current stock price represents one of its lowest on a price-to-sales ratio basis. However, investors are advised to pay close attention to the company’s costs and financial health, which could determine the stock’s future direction. Nio is raising funds through share sales to finance research and development of EV technologies and new products, as well as to bolster its balance sheet. The importance of this financial aspect is underscored, as Nio is experiencing significant cash burn, with current assets exceeding its current liabilities at the end of the fourth quarter.
