Nio (NYSE:NIO) is a popular option for those looking to invest in the electric vehicle (EV) market. Today, NIO stock is down around 5% year-to-date (YTD). Generally, shares have been more affordable than many other EV stocks. Today, they trade for about $46.
For 2021, the story for all automobile makers has been the global semiconductor shortage. Basically, a scarcity of chips has led to production line shutdowns and auto makers taking a big revenue hit. And of course, the shortage has also had a big damping effect on EV stocks, including NIO.
If it’s true the chip shortage is easing, however, that could trigger a rally for traditional auto and electric vehicle stocks. NIO stock should also see the benefit. So, with that possibility on the horizon, is now the time to take advantage of the current weakness in NIO before it rebounds?
Keep in mind, prior to taking a dive in February as the chip shortage became an issue, NIO shares were trading near the $63 level.
NIO Stock: Could the Semiconductor Shortage Be Easing?
In general, automakers have had a tough time for the first half of 2021. We tend to overlook the fact that most technology in cars require chips nowadays. With semiconductors in short supply (resulting in surging semiconductor stocks), auto makers have been taking it on the chin. In February, as the extent of the shortage started to become apparent, it was estimated that automakers would lose $60 billion in revenue as a result. Now, if anything, the situation has only become grimmer.
That said, Nio has weathered the chip storm better than many traditional automakers. However, the company has still felt an impact. At the end of March, Nio announced it would be forced to shut down its production line for five days because of the shortage. Subsequently, it lowered its vehicle delivery forecast for the first three months of the year. Naturally, NIO stock slipped again when that news broke.
Opinion on when the semiconductor shortage will begin to ease has been mixed, but largely negative. As recently as late June, headlines were suggesting that the supply crunch could actually “get worse before it gets better.”
However, long-awaited good news for the industry arrived last week. The Wall Street Journal reported that the world’s largest custom chip maker is ramping up production of auto industry chips by 60%. As a result, the shortage will be “greatly reduced starting this quarter.”
The Nio Story Has Many Additional Positives
Even despite the shortage, though, Nio has still managed to set monthly vehicle delivery records through the year. What’s more, the prospect of the semiconductor shortage coming to an end — or at least being greatly reduced — should result in the market looking at automobile and EV names like NIO stock less critically.
But that’s not all; Nio investors actually have many other positives to celebrate here.
On top of ongoing record vehicle deliveries through 2021, the company is expanding its market outside of China (starting with Norway). There’s also a new extended range Nio ET7 coming in 2022. Finally, Nio also recently outlined an aggressive plan to build battery swap stations as part of its Battery as a Service (BaaS) over the next several years.
Bottom Line on NIO Stock
NIO stock currently rates a “B” in Portfolio Grader. Overall, it’s well positioned for growth as the EV market takes off. The company is also a proven performer and should be able to overcome the current (and hopefully waning) shortage.
That being said, Nio is not without risk, either. At this point, one of the larger concerns here is that, as a Chinese stock, it has potential for a future de-listing. But that’s several years away and not a sure thing at all.
All in all, if you’ve been considering a NIO investment, the timing looks good right now.
On the date of publication, Louis Navellier held a position in NIO. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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