The NIO share price has plummeted 60%! Here’s what I’m doing now

After its meteoric rise in recent times, the NIO share price is down 60% year-to-date. Here, Charlie Keough looks at if he should be buying NIO.

| 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.

Blue NIO sports car in Oslo showroom

Image source: Sam Robson, The Motley Fool UK

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Electric vehicle (EV) manufacturer NIO (NYSE: NIO) has been one of the best-performing stocks over the past few years. For example, the stock saw monumental gains in a Covid-struck 2020, rising over 1,000%.

However, 2022 has seen the share price plummet 60% as a compiling number of pressures have dented investor confidence surrounding the firm. In fact, since its all-time high back in January of last year, the stock is down a whopping 78%.

So, why has the NIO share price seen such a drop? And does this fall mean an opportunity for me to buy NIO shares? Let’s explore.

Why is the NIO share price down?

Well, the share price has seen a drastic drop for a few reasons.

Firstly, Covid cases in China are skyrocketing. As a result, cities such as Shanghai have entered extreme lockdowns. There are also concerns that similar rules may be applied to Beijing. For NIO, this has seen major disruptions to its supply chain as last month the business announced it had suspended production of vehicles. To counteract the fall in production, NIO increased the price of three of its SUVs. The share price fell 9% on the back of the news, reinforcing the lack of investor confidence surrounding the firm.

Secondly, NIO has seen a fall in price due to the possibility of its delisting from the US exchange. This is because the firm does not meet certain criteria for foreign stocks, most significantly on accounting issues and the Holding Foreign Companies Accountable Act. With delisting now a serious threat, the stock has dropped considerable amounts as a result. 

Wider outlook

With this said, there are positives I see with NIO. As a long-term investor, short-term concerns such as supply chain issues do not worry me. NIO has already begun to speed up production again. And this is seen through the delivery of its new ET7 model. Should this continue, it should hopefully help get the business back on track.

Further, NIO has posted some impressive results in recent times. For its full year, revenues increased 122% year-on-year. While growth is expected to slow in 2022, this highlights the potential of the firm. 

However, concerns such as competition deter me from buying NIO stock. As the EV space continues to grow, it may struggle with its plan for expansion. With more established manufacturers such as Volkswagen making moves in the sector, this could harm the market share NIO sees in the future.

Rising interest rates spell further bad news for it. In uncertain times like these, growth stocks tend to be hit the hardest. Hiking rates also make the debt it finds itself with more challenging to pay off. A continuation of this could see the NIO share price suffer.

What I’m doing

As much as the supply chain issues have impacted its share price, as a long-term investor this does not deter me from the stock. However, what does worry me is the growing threat of delisting. I think this, along with rising interest rates, could see the NIO share price fall further. As a result, I won’t be buying the shares today.

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.

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares 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

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »