The Motley Fool

Should I buy NIO shares at the current price?

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.

test
Image: NIO

NIO (NYSE: NIO) had an incredible 2020, with the share price rising nearly 1,200% last year. However, the beginning of 2021 saw a decline in the share price, leading me to buy NIO shares earlier this year for a fraction of the $67 all-time high reached in January 2021. Having fallen over 25% in the last six months, is now a good time for me to buy more NIO shares? Let’s take a look.

Why is NIO falling?

First, I need to look at why the NIO share price has taken a hit this year. One reason is due to the tech sell-off. As explained here by my fellow Fool Dylan Hood, the sell-off may be one reason why the NIO share price is down over 13% year-to-date. Another major reason is the global semiconductor shortage as a result of the pandemic, which is directly impacting NIO’s production capability.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The positives

Despite its volatile start to 2021, I have always regarded NIO as a long-term investment for my portfolio. It has improving financial results, and the latest set from Q1 of this year was not an anomaly. Revenues rose 482% from Q1 2020 and increased 20% from Q4 of last year. Deliveries were up nearly 16% from last quarter and a massive 422% year-on-year. The semiconductor issue mentioned above has halted production at times this year, yet the fact that deliveries have still increased quarter-on-quarter shows the firm’s strength – a reason why I deem NIO shares a must-have for my portfolio.

Currently trading at around $45, that’s over 30% lower than the peak back in January, showing the potential NIO shares offer to investors.

NIO shares risk

A risk, however, is that the current price is very high. When I look at established companies such as Ford, which has expanded into the electric vehicle (EV) industry but is trading below $15, I question whether NIO is overpriced and therefore set to fall further.

I think another risk for it in the future is competition. Alongside obvious competitors such as Tesla, recent times have seen more businesses venture into the EV sector. Ford recently stated its ambition to be all-electric in Europe by 2030, whilst the likes of Porsche and Daimler (the owner of Mercedes-Benz) have recently introduced the Taycan and EQ range, respectively. These companies delving into the EV industry could negatively impact NIO shares.

My verdict

NIO’s growth indicates that this stock has the potential to be a great long-term investment. The $67 share price further shows the potential it has to rise – meaning the dip NIO shares have experienced could make now a great time to buy. Yet issues remain. The semiconductor shortage is expected to continue into 2022 – potentially posing further issues for the firm in the future. To add to this, the EV market is seeing more and more businesses looking to capitalise on growing demand. However, strong Q1 results along with the large Chinese market NIO has at its disposal fill me with optimism for the long-term future of the share price, and as such, I would buy.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Charlie Keough owns shares in NIO. The Motley Fool UK owns shares of and has recommended NIO Inc. and 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.