NIO stock is selling off – but I’m buying more!

NIO stock is down nearly 50% in two months, but Fool UK contributor Joe Clark is buying more in the sell-off. Here, he explains why.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

NIO (NYSE: NIO) stock has just closed at $35.21, nearly 50% down from its all-time high in January ($66.99). But I am not just holding… I am buying more!

Shares of NIO fell after it reported a bigger than expected loss in its Q4 earnings, but also record revenues (over $1 billion). It has also been dragged down by the broader sell-off of growth and technology stocks. However, I think at these levels it is a bargain.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

NIO stock keeps breaking targets

NIO said its sales in the Q1 of 2021 would reach 20,000, which would be more than five times the amount it sold during the same period of 2020. In the first two months of 2021, its combined sales totalled over 12,000 vehicles. January car deliveries, for example, were 352% up year on year and were its tenth month of double-digit growth.

EV market share

China is going to be the major electric vehicle (EV) consumer this decade. According to a report by Deloitte, China will hold 49% of the EV market share worldwide by 2030. And in 2021 Chinese auto sales are expected to grow 4% that’s 1.2 million cars. The Chinese government supports NIO, which is likely to boost its efforts and help retain its domestic market share.

I would be happy with NIO just trying to take claim as China’s number one EV company but it has stated it plans to enter the European market later this year, and a Deutsche Bank report in February showed that the company had posted job listings relating to its ambitions to grow in the US market.

Positive speculation

Shanghai Securities News said recently “Don’t be surprised to see NIO at Sinopec’s gas stations in the future, the partnership between the two is approaching!”. This could be a game-changer for NIO. The company uses a battery swap model compared to competitors where customers can pay a monthly fee. This works where customers ‘loan’ a battery, which they swap at any NIO station, therefore not having to deal with charge time and no upfront cost for the battery. If NIO and Sinopec were able to reach an agreement on allowing NIO to operate this service at some of its 30,000 stations, this could be very positive for NIO’s expansion.

Recent analyst coverage

Deutsche Bank analyst Edison Yu said that NIO’s revenue in Q4 were largely in line with expectations and its guidance for the first quarter was impressive, while sales could start overseas during the year.

The team raised its full-year sales estimate for NIO by 6,000 units to 96,000 units. They also reiterated their $70 price target on NIO, and see the recent stock weakness as a buying opportunity.

Could it fall further?

In the last year, NIO stock has had overall an incredible run rising over 1000%. Therefore it could be argued that this sell-off recently isn’t overdone, and actually quite small compared to its rise over the last year.

Also, a big risk to NIO isn’t just Tesla but the challenge from established car makers, such as Mercedes and VW. These two giants have both vowed and set aside billions of dollars to spend on its EV offerings over the next few years. They benefit from already being established in all geographical markets that NIO hopes to enter.

Summary

I bought NIO originally for the long term but with the recent sell-off, I think in the short term there is great potential for capital growth. While the levels stay sub $45, I will keep loading up!

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Joseph Clark owns shares in NIO. The Motley Fool UK has no position in any company mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".
Investing Articles

Stock market crash: here’s why falling prices is good news

Over in the US, a stock market crash is battering high-priced stocks. But I see falling shares as an opportunity…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

These 5 FTSE 100 shares crashed in 2022. I’d buy 1 today

Although the FTSE 100 index is flat in 2022, some Footsie shares have crashed hard this year. But I see…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How investors can boost their passive income when the FTSE is falling

Stock markets are plagued with fears right now. Here's why I firmly believe those fears improve our passive income prospects.

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Investing Articles

2 cheap UK shares to buy right now!

Recent market volatility means many top stocks now trade at rock-bottom prices. Here are two cheap UK shares I'm thinking…

Read more »

Rolls-Royce's business aviation engine, the Pearl 700
Investing Articles

The Rolls-Royce share price is just pennies. Am I missing something?

As the Rolls-Royce share price lingers in penny stock territory, our writer revisits the investment case that has attracted him…

Read more »

Compass pointing towards 'best price'
Investing Articles

How to put a valuation on the Woodbois share price

The Woodbois share price has fallen from its recent spike, so should I buy now? And how can I work…

Read more »

Inflation in newspapers
Investing Articles

I’d fight inflation with these 2 FTSE 100 dividend shares

With inflation hitting a 9%, I'm boosting my passive income and turning to these two FTSE 100 dividend stocks.

Read more »

New Ways of Investing - Hands Only Using Smart Phone
Investing Articles

2 cheap Footsie stocks to buy for BIG dividends!

The recent stock market sell-off leaves plenty of top stocks looking too cheap to miss. Here are two great Footsie…

Read more »