NIO stock is down over 33%! Is this the opportunity of a lifetime to buy?

NIO (NYSE:NIO) stock has tanked in recent months. Paul Summers asks whether now might be the time to pile in.

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NIO (NYSE: NIO) stock has now fallen by a little over a third from its high of a little under $63 back in February. Today, I’m questioning whether now’s the time to load up on this undeniably exciting growth play.

NIO stock: opportunity knocks?

NIO’s fall from grace shows just how quickly market sentiment can change. From this time last year to February, the share price climbed a quite staggering 1,800% to just under $63! Since then however, it’s tumbled to just above $41 a pop. What’s going on?

The chief reason for stock’s decline is arguably not of the company’s making. The global chip shortage has impacted many hot tech stocks and this is likely to continue for the rest of 2021. That’s problematic for the Chinese electric car maker, especially given the encouraging progress it’s made on rapidly upscaling production over the last year. 

We also need to consider whether the decline of NIO stock may be partly due to the fall in US rival Tesla‘s (still probably absurd) valuation. A drawback of being in a hot space like electric vehicles means that all company share prices tend to rise and fall in tandem.

On top of this, NIO simply isn’t selling anywhere near the same amount of cars as Tesla. That’s ironic considering the latter’s sales figures are still far lower than traditional manufacturers. And while the chip shortage will be resolved, competition in this space won’t get any easier. 

All this makes me think that NIO’s fall may not be complete, especially if the perpetually frothy US market were to cool. Despite enduring a similarly tough time, I think there’s another automotive-related share worth buying. What’s more, it’s UK-listed! 

Contrarian pick

Today’s interim numbers from AB Dynamics (LSE: ABDP) haven’t been welcomed by the market. As I type, the share price of the testing systems supplier is down 8%. 

This is understandable. Revenue came in at £27.3m over the six months to the end of February. That’s a slight improvement on the second half of 2020. However, it’s still below the £34.7m achieved in H1 2020. Statutory operating profit of £1.4m was also less than half the £3.6m achieved over the same period in 2019/20.  

That said, I remain optimistic. Order intake improved over the period as confidence returned among AB’s customers. Although most definitely not an income stock, the payment of dividends also suggests confidence in the medium-term outlook. In the meantime, AB boasts a solid balance sheet with net cash of £33.1m. 

Naturally, the rebound will take time, especially if the UK experiences a third wave of the pandemic. As CEO Dr James Routh reflected this morning: Visibility remains limited and there remains short-term uncertainty as to the shape and rate of the recovery.”

Factor in some Brexit-related concerns and today’s share price dip makes sense. 

Solid hold

For me however, the growth opportunities in this space remain compelling. AB already serves the top 25 global manufacturers and is a trusted leader in its niche market. As a ‘picks and shovels’ play on the electric and autonomous vehicle market, I think it’s a great option.

By now, you’ll have gathered I’m happy to continue holding my shares. But I’m less inclined to think NIO stock represents the opportunity of a lifetime just yet.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers owns shares of AB Dynamics. The Motley Fool UK owns shares of and has recommended NIO Inc. The Motley Fool UK has recommended AB Dynamics. 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.

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