Chinese electric vehicle (EV) giant Nio (NYSE:NIO) has seen heightened volatility amidst a challenging macroeconomic environment. The war in Europe, rising inflation rates, and monetary tightening by the Federal Reserve have weighed down stock market performance. Moreover, supply chain constraints have negatively impacted several companies, including Nio. However, these short-term hiccups have nothing on NIO stock and its bull case.
This year, NIO stock has taken a beating at the stock market. The EV maker has buckled under the pressure from ongoing supply constraints. Moreover, the tumultuous macroeconomic environment and regulatory hurdles for U.S. listed Chinese stocks haven’t helped either.
Nevertheless, its long-term case is intact, with multiple catalysts in motion. It will be rolling out its first sedan models this year and has plans to continue its expansion in the European region. Additionally, its domestic market business remains solid and should be in for another incredible year.
Weaker-Than-Expected Delivery Update
NIO stock slid recently after reporting weaker-than-expected deliveries for February. It ended the month with 6,131 deliveries, a 10% increase from the prior-year period. However, month-over-month, its auto deliveries were down by 34%.
Ford’s (NYSE:F) chief financial officer (CFO) John Lawler recently talked about how his company faced severe supply chain troubles due to the ongoing geopolitical turmoil. The worsening geopolitical situation also puts Chinese companies such as Nio at risk. We must consider that China maintains close political and economic ties to Russia, and the rising tensions between Russia and the U.S. could spell trouble for Chinese companies.
Nevertheless, car deliveries and sales can fluctuate from month to month. Hence, investors should not make much of the weaker results in February. Moreover, we need to consider that February follows the Chinese New Year and is also the shortest month in the calendar. Additionally, the management remains upbeat over Nio’s full-year performance. The company will be announcing its fourth-quarter and full-year results later in the month, which should give a deeper insight into its performance and developments.
What Will Happen to Nio This Year?
Nio has been a growth juggernaut in the EV realm posting triple-digit growth rates in the past year. Despite the challenges, its fundamentals remain robust and continue to turn heads. The Chinese EV maker delivered over 25,000 vehicles during the fourth quarter last year, falling short of just 500 vehicles from the highest range of its guidance.
Furthermore, it will be tackling the lower end of the market with the launch of a sub-brand. With an annual capacity of 60,000 units, Nio plans to give some lower-end automotive manufacturers a run for their money. Previously, the company has primarily targeted the premium market, which was smart considering the faster adoption of EVs in that segment.
Additionally, Nio plans to list its shares in Singapore and Hong Kong. Hence, NIO stock will be available to new investors. However, the development also shows that it may be concerned about its position in the U.S. stock markets.
Another positive for the company is that regulatory troubles from home are unlikely to hinder its growth trajectory. EV adoption is a core agenda for the Chinese government in the country’s journey to becoming carbon neutral by 2060. Hence, domestic EV companies such as Nio will benefit from the government’s accommodative industry policies.
Bottom Line on NIO Stock
All in all, NIO stock looks like a highly attractive investment post-selloff.
It has multiple growth catalysts which will continue to expand its revenue base.
There’s likely to be some movement leading up to its earnings release later this month, which makes it an excellent time to jump in.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
