Some wide-eyed stock traders might hope that China-based electric vehicle manufacturer Nio (NYSE:NIO) will be the “comeback kid” of 2024. However, after conducting thorough due diligence, our NIO stock outlook doesn’t call for any miracles this year. Indeed, the stock only gets a “D” grade because Nio’s EV-delivery stats show contraction, not growth.
In China and elsewhere, a favorable economic backdrop can prompt a broad-market rally. You should strongly believe in a company if you’re going to invest it in. So, don’t assume that every share-price bounce means Nio is necessarily on the cusp of a long-term turnaround.
The NIO Stock Trajectory Hasn’t Changed
Not long ago, InvestorPlace Assistant News Writer Shrey Dua reported that NIO stock rallied 10% in a single day. However, this wasn’t because of any company-specific catalysts.
Rather, the stock-price pump was just part of a broad-market rally in Chinese stocks. Apparently, the Chinese government is directly intervening in the country’s stock market.
By vowing to crack down on short selling, among other measures, China’s government catalyzed a quick, sharp bounce in many stocks, including NIO stock. This doesn’t mean the country’s fundamental problems have been suddenly solved, though.
To quote Redmond Wong, Chief China Strategist at Saxo Markets, “The market grapples with complexity amid a distressed property sector, fiscal constraints of local governments, and a lack of confidence in the private sector.”
Besides, a quick bounce did not change the long-term trajectory of NIO stock. Getting it back up to $6 isn’t much of an achievement, given that the stock once traded at $60.
Nio’s Issues Haven’t Gone Away
Government intervention to prop up China’s stock prices won’t solve Nio’s problems. It won’t change the fact that Nio has been consistently unprofitable for a long time and will almost certainly be unprofitable during the current quarter.
You might hear about a Chinese sovereign investment fund buying index funds to prop up the country’s markets. Don’t let this distract you from your company-specific research on Nio. When you do that research, you’ll find that Nio’s EV deliveries plunged 44% from 18,012 vehicles in December 2023 to 10,055 vehicles in January 2024.
Perhaps you’ll also discover that Nio only commanded a minuscule 2.1% share of China’s new-energy vehicle market last year. You’ll hopefully see that Nio is having a tough time selling “luxury” (i.e., pricey) vehicles in a low-demand, high-competition EV market. In a possible sign of desperation, Nio just unveiled versions of its vehicles with significantly reduced driving ranges.
Without a doubt, Nio will sell these EV versions at substantially reduced prices. Meanwhile, it probably won’t be easy to sell these vehicle versions to drivers with “range anxiety.”
NIO Stock Outlook: Don’t Wait Around for a Silver Bullet
The point is, don’t let a quick share-price bounce change your NIO stock outlook. The overall trend has been to the downside for years, so keep your eyes on the big picture.
Most importantly, be sure to keep tabs on Nio’s company-specific data. This, more than broad-market interventions and fluctuations, should inform your assessment of Nio in 2024. And, since Nio’s issues are still present and worrisome, we’re only willing to give Nio shares a “D” grade today.
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.
