Sometimes, even the most promising growth stories can have unfortunate endings. China-based electric vehicle manufacturer Nio (NYSE:NIO) has come a long way during the past several years. Yet, Nio’s recent financial and operational data don’t support a long position in NIO stock right now.
Plus, Nio is embarking on a business venture that could turn out to be a complete disaster. Only time will tell, but the risk-to-reward profile just doesn’t look favorable for Nio’s prospective and current investors.
NIO Stock Is Cheap for a Reason
There’s a big difference between a stock that’s a bargain, and one that’s cheap for a reason. After delving into Nio’s fundamental facts, you’ll surely understand why NIO stock is still nowhere near its early 2021 peak price.
Let’s start with Nio’s faltering EV deliveries. The company bragged about delivering 19,329 vehicles in August of this year. However, that’s down from 20,462 vehicles in July.
Or we can take it quarter by quarter. Nio’s EV deliveries have declined from 40,052 in 2022’s fourth quarter, to 31,041 in the first quarter of 2023, and then to 23,520 in this year’s second quarter. That’s a rapid decline, to put it mildly.
Turning to Nio’s financials, the automaker’s Q2 2023 revenue declined 14.8% sequentially and decreased 17.8% year over year. Nio’s net earnings loss widened from 25 cents per American Depositary Share in the year-earlier quarter, to 51 cents per ADS in 2023’s second quarter.
Nio’s Potentially Ill-Fated Smartphone Venture
In case you’re still thinking about buying and holding NIO stock, here’s a news item that might change your mind. Nio is, believe it or not, attempting to branch out into the smartphone market.
This could easily cause Nio’s financials to go from bad to worse in 2023. Just consider how ultra-competitive the smartphone market is today. Nio could end up spending vast sums of money to advertise and commercialize its new smartphone model.
And, if it’s not a blockbuster success, Nio’s capital losses might widen even further. Nio CEO William Li is apparently hellbent on jumping into the fray.
He proclaimed that Nio “would like to use the phone as a carrier to provide the best experience for our vehicle users.”
Somebody needs to tell Li that people already have smartphones and they’re typically loyal to the brands they already use. People take their current phones everywhere they go, including when they’re driving.
So, while anything is possible, don’t count on Nio’s smartphone business to be a resounding success.
NIO Stock Looks Like a Waste of Time and Money
Nio’s operational and financial facts aren’t particularly encouraging. Moreover, there’s certainly no guaranteed that Nio’s smartphone business will be lucrative.
It’s hard to admit this, but Nio’s best days may already be in the rear-view mirros. Therefore, NIO stock earns a “D” grade and is, without a doubt, cheap for a reason (or two or three reasons).
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
