Chinese electric vehicle (EV) producer Nio (NYSE:NIO) is scheduled to report earnings next week. Despite some high volatility, the company has performed well over the past month, although NIO stock remains down significantly for the past two quarters.
The threat of tariffs imposed by the U.S. government has cast some dark shadows over NIO stock recently. But as shares rise on pre-earnings momentum, investors are likely considering an important question: Is this former EV winner on the verge of a comeback, or is the current bump a temporary phenomenon?
When Nio reports first-quarter earnings on June 6, it will do much to determine its growth prospects. But as we wait to learn whether Nio can exceed Wall Street estimates, there are other factors to consider here.
What’s Happening With NIO Stock?
Even after rising 14% over the past one month, NIO stock hasn’t garnered much favorable coverage from Wall Street. Bank of America recently reduced its price target on shares, maintaining a “neutral” rating and a skeptical outlook. Out of 18 polled analysts on TipRanks, eight rate NIO as a buy while nine give the stock a hold rating.
There are some potential tailwinds for Nio on the horizon. The company could certainly benefit from China’s new investments in domestic solid-state battery production. But that doesn’t mean investors should be too optimistic about the upcoming earnings report. The EV market is still volatile and China is full of other automakers, some of which will be able to scale production at much higher levels than Nio.
As InvestorPlace contributor Josh Enomoto reports:
“To be sure, the global EV sector is presently experiencing challenges, casting a dark cloud on NIO stock and others. It’s not that the sector is experiencing an outright deflation. Rather, the market is slowing from its prior tremendous growth rate. Further, economics matters. With combustion-powered vehicles offering a more affordable option for middle-income consumers, this dynamic reduces the addressable market for EVs.”
Overall, it will likely be hard for investors to have much faith in NIO stock as the company prepares for its earnings report. The combination of a difficult market and an equally complicated geopolitical landscape has resulted in a troubling outlook for this automaker. Even as Nio expands its reach in the EV charging space, it still faces an uphill battle against stronger, trendier competitors.
On the date of publication, Samuel O’Brient did not hold (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.
