NIO stock is down 50%! Is it time to buy?

After its rise in 2020, NIO stock is down 50% year-to-date, in this article this Fool assesses whether now’s the time to buy.

| More on:
Back view of blue NIO EP9 electric vehicle

Image source: Sam Robson, The Motley Fool UK

NIO (NYSE: NIO) stock made a name for itself in 2020. Rising a meteoric 1,400% during this time, since then momentum has slowed. 2022 has seen the share price drop 50%. While the last 12 months have seen over 60% shaved off its share price.

So, does this fall present an opportunity for me? And is it time for me to be adding NIO stock to my portfolio? Let’s take a look.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Why is NIO stock down?

There are multiple reasons why NIO has taken a hit. One of these is the combination of rising inflation along with spiking interest rates. While higher inflation impacts the value of future earnings, rising interest rates make borrowing money and paying off debts more difficult. For a growth stock such as NIO, this spells bad news.

As well as this, the firm has also struggled with supply chain issues. In April the firm announced the suspension of vehicle production due to rising Covid cases in China. While the business was relatively quick to begin production again, I’d expect the suspension to negatively reflect on NIO’s revenues this year.

Is it time to buy?

While NIO is facing some issues, there are still reasons to be bullish on the firm.

For example, it has seen impressive growth over the last few years. In 2021, revenues increased 122% year-on-year. And while it has struggled this year, it clearly still has growth potential. When considering buying shares, growth like this is hard to ignore.

The company also trades on a price-to-sales (P/S) ratio of just 4.84, which looks cheap. For comparison, competitor Tesla currently trades on a P/S ratio of 12.12.

However, a concern for me that I have with all-electric vehicle stocks is competition. As this space continues to expand, NIO may struggle to retain its market position. For example, competitors like Ford have already made headway in the EV sector. And with its pledge to be all-electric by 2030, along with its $1 billion Cologne site transformation, NIO may struggle to keep up with more established businesses. Should this be the case, we would most certainly see a drop in the NIO share price.

Another threat to NIO comes in the form of delisting. With the real threat of the stock being removed from the US exchange due to pressure from within China, I think we could see the share price continue to fall as a result.

So, while NIO offers potential through its strong growth, there are too many concerns for me to deem the stock a buy for my portfolio. I think worsening economic conditions will continue to mean the stock suffers. And as more competitors venture into the EV space, it may see its market share negatively impacted. Although the stock is trading considerably lower than it has in recent years, I won’t be buying shares today.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

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

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

£10,000 invested in BT shares 10 years ago is now worth this much

It's painful to remember that BT shares reached over £10 at the peak of the dot com bubble in 1999.…

Read more »

Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Investing Articles

Is now the time to buy bank shares?

Our writer considers whether bank shares could be a bargain buy for his portfolio right now -- or a potential…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

After steep falls, are Royal Mail shares a steal?

Royal Mail shares have more than halved since peaking a year ago. After months of steep falls, this popular stock…

Read more »

Young Woman Drives Car With Dog in Back Seat
Investing Articles

Dirt-cheap, 1 of my best stocks to buy also pays an above-average dividend!

This Fool has decided to buy the shares on his best stocks to buy now list with the shares looking…

Read more »

Light bulb with growing tree.
Investing Articles

The AFC share price just tanked! Is now the time to buy?

The AFC share price fell nearly 10% on Wednesday after the H1 revenue announcement. So, should I add this stock…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

These shares have been growing dividends for decades. I’d buy!

Our writer considers the merits for his portfolio of buying two shares with a track record of growing dividends.

Read more »

Close-up of British bank notes
Investing Articles

Is the M&G dividend yield heading to 10%?

As the M&G dividend yield heads towards double digits, out writer explains why he is considering buying more of the…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

3 top dividend shares to buy now

With weakness in the markets, I reckon it's a good time to search for top dividend shares to buy now.

Read more »