The EV stock recently reached a 52-week low and is currently considered undervalued, though several factors require investor attention.
Nio (NIO) shares saw a 12% rally by the 18th of last month, leading investors to believe the electric vehicle (EV) manufacturer’s stock had stabilized. However, this optimism was short-lived as the stock reversed direction, reaching a 52-week low and ending March with a 17.7% decline, as reported by S&P Global Market Intelligence.
Several factors contributed to Nio’s stock decline, including decreased deliveries, increased losses, and a share sale. On March 1, Nio released delivery numbers that were mixed: deliveries rose 62% year over year in February, but fell 4.8% sequentially. Notably, while Nio’s flagship brand deliveries increased 15% from January, its mass-market sub-brand Onvo experienced a nearly 32% sequential drop. Additionally, Nio reported a record net loss of $974 million for the fourth quarter, which was a 33% increase year over year despite a 13% growth in vehicle sales.
The gross margin for Nio improved to 11.7% in Q4 from 7.5% in the prior year, yet higher operating expenses negatively impacted its profitability. This was largely due to increased spending on marketing, brand promotion, and sales network expansion. Later in March, Nio’s announcement to sell around 136.8 million shares in offshore transactions at 29.46 Hong Kong dollars per share represented a 9.5% discount from the previous day’s closing price on the Hong Kong stock exchange. Consequently, Nio’s stock fell to a 52-week low of $3.57 on March 31.
Looking ahead, Nio is focusing on its sub-brands for growth. Onvo commenced deliveries of its first model, the L60 SUV, in September 2024 and is preparing to launch its second model, the L90, shortly. Although Onvo deliveries declined in March, the trend may stabilize over the next few quarters, considering the Chinese New Year period is typically a weak season for auto sales. Additionally, Nio’s second sub-brand, Firefly, plans to launch its first model—a compact hatchback—on April 19.
Nio’s projected figures offer some hope. It anticipates delivering between 41,000 and 43,000 vehicles in the first quarter, indicating a potential annual growth of 36% to 43%. Its revenue projection for Q1 also suggests possible growth of approximately 23% to 30% year over year.
Currently, Nio’s stock is at one of its lowest price-to-sales ratios, but investors should monitor its expenses and financial health, which could influence the stock’s future trajectory. Nio indicates it is selling shares to fund research and development of new EV technologies and products, as well as to strengthen its financial position. Attention to Nio’s financials is crucial, as the company is incurring significant cash expenditures, with current assets surpassing its current liabilities at the end of Q4.
