NIO (NYSE: NIO) seems to have been fighting an uphill battle so far in 2022. Supply disruptions, Chinese regulators, and Covid-19 restrictions have plagued the automobile manufacturer and as a consequence, its shares have fallen over 43% this year. Over the last 12 months, the shares have fallen an even greater 48%. So, currently sitting at $19, is now the time for me to add this Chinese EV stock to my portfolio? Or should I steer clear? Let’s investigate.

The lowdown

A major driver behind NIO’s poor share price performance has been the state of the macroeconomy. Inflation has been soaring across the globe, caused by a combination of Covid-19-related supply bottlenecks and soaring energy prices stemming from the tragic Russia-Ukraine conflict. Central banks across the globe have been hiking interest rates in an effort to curb this red-hot inflation. When rates rise, it weighs on growth stock valuations as investors shy away from speculative assets and pour money into safe ones. Evidently, this has been bad news for NIO.

Another threat the company has been battling is supply issues caused by a series of lockdowns in Shanghai. The lockdowns forced NIO — along with other Chinese-based EV companies like Li Auto and Xpeng — to slow down or even halt production. This resulted in a series of disappointing monthly delivery figures that seemed to have tipped investors’ sentiment away from the stock.

The firm has also been facing domestic pressure from Chinese regulators. The Chinese government aimed to curb the power of US-listed Chinese companies, and NIO has faced delisting fears as a consequence. The EV giant has undertaken secondary listings in Hong Kong and Singapore to mitigate this risk, but the threat has put serious pressure on the share price in recent months.

Electric results

In the company’s Q1 2022 results, it outlined some encouraging metrics. Year-on-year deliveries rose by 29%, with revenues climbing 24% to $1.5bn. In addition to this, the firm’s losses shrank 10% compared to the fourth quarter of 2021. This highlights the encouraging move towards profitability. In its full-year results for 2021, NIO outlined it had increased its sales by 118%, with revenues climbing a staggering 122% compared to the year prior. If it can continue this trajectory in 2022, then I think it could have a rosy stock exchange future.

A product-specific standout that entices me to buy the stock is its unique battery switching technology. Users can swap out their battery within minutes, making it super convenient. At present, NIO is the only manufacturer offering this service in the EV market. This edge could help the firm keep its market share in the extremely competitive industry.

The verdict

NIO has experienced astronomic growth in the last few years and has some market-leading tech behind it. However, for me, the macro-outlook is just too risky to invest in growth stocks at the moment. In addition to this, the supply issues and Chinese regulatory threats could continue to plague the firm. As such, I won’t be buying any shares at $19.

The post NIO shares are falling: is it time to buy at $19? appeared first on The Motley Fool UK.

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Dylan Hood 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.

The demand for EVs (electronic vehicles) is growing at a rapid rate. In just a few years, it has gone from a niche product to a dominant force in the automobile industry. It is estimated that EV sales will outstrip traditional cars by 2040. And to capitalise on this projected growth, I have identified the top UK shares that could power the EV revolution as possible additions to my portfolio. These two companies address a very specific problem in the industry right now, making it the perfect time for me to invest.

Why am I bullish on the EV industry?

It is clear to me that EVs are the future of the automobile industry. The top automobile manufacturers in the world have adopted the tech and are busy developing all-electric cars. And further mainstream adoption is already underway. 

Sweden is consistently ranked as the most sustainable country in the world. And the nation just witnessed record-breaking EV sales last month. EVs made up 50.1% of all automobile sales in July 2022. This was a big jump from 2021’s 37.6%. In fact, globally, June saw the highest EV sales in history with 913,479 new registrations in June, which is 54% more than a year ago. This could take global sales past 10m units next year.

And as manufacturing steps up pace to meet the demand, battery metals like lithium and copper have become highly valuable. There are some emerging mining UK shares with a focus on soft battery metals. And I think investing in these companies could boost my growth portfolio returns over the next decade.

UK shares to buy in the EV sector

Elon Musk stated earlier this year that the lack of battery-grade lithium is a major roadblock in EV production today. And Atlantic Lithium (LSE:ALL) is a company looking to address this issue.

The company owns and operated the Ewooya lithium project in Ghana. While still under exploration, the mine is estimated to hold 30.1Mt of Lithium ore. And recent drillings have found deposits much closer to the surface, which reduces the time required to reach extraction. 

Copper is another metal that batteries require. And thanks to the demand, copper prices have gone up by 125% since 2020. Taseko Mines (LSE:TKO) is a copper producer in Canada that owns and operates the Gibraltar Mines. The company produces an average of 130m pounds of copper and 2.5m pounds of molybdenum per year.

While most UK shares in this space are still under exploration, Taseko is an established business. It had its best quarter ever this year, amassing US$38m in revenue, up 61% from Q1 2021.

However, there are some big risks to consider. Mining is a cash-intensive operation and profits are highly dependent on commodity prices. Prices of these metals are currently high but could fall rapidly when demand stabilises, cutting profits.

Atlantic Lithium is yet to reach production, making it highly speculative. But I think its tie-up with Piedmont Lithium, a Nasdaq-listed mining giant, is a huge plus. Piedmont has a deal with Tesla that could make Atlantic Lithium a direct supplier to the most-recognised EV brand in the world.

Both UK shares are well-backed and fit right into the EV supply chain. And this is why I am willing to invest a £1,000 lump sum in these two companies if market performance is positive across 2022. 

The post 2 top UK shares I’m buying for the EV revolution appeared first on The Motley Fool UK.

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Suraj Radhakrishnan 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.

NIO (NYSE: NIO) stock popped last week, rising over 29%. The primary reason for this was the unveiling of its new ES7 EV SUV. While this is good news, the shares are still down 37% year-to-date, and 54% over the past 12 months.

So, with NIO back on the rise is now the time for me to buy some shares for my portfolio? Or should I steer clear of the Chinese EV powerhouse? Let’s investigate.

Why NIO stock is up

As mentioned, the primary reason for the shares rising was the announcement of the launch of its new SUV. It includes the latest autonomous driving technology from NIO and is the fastest SUV the company has ever produced, with a zero to 60 mph acceleration of just under four seconds. It also features the firm’s new battery swapping service. Investors reacted positively to the product’s unveiling, pushing the shares up over 16% after the announcement.

Just 11 days ago on 9 June, NIO released its 2022 Q1 results. Vehicle sales were up 24% year-on-year, with revenues rising by the same percentage. Losses also fell compared to the previous quarter, an encouraging move closer to profitability. However, NIO stock actually slumped on the announcement of this news, as vehicle margins shrank. CEO William Li attributed this fall in margins to “volatilities of supply chain and the challenges in vehicle delivery resulting from the recent Covid-19 resurgence”.

Not out of the woods yet

Although US-listed NIO shares are on the rise, there are still some risks ahead for the firm. Firstly, rising inflation could pose a big threat. It reached a 50-year high in May, hitting 8.6%. The way the US Federal Reserve is tackling these rising prices is by raising interest rates. On Wednesday, the Fed announced that it was hiking rates to a range of 1.5% to 1.75% in an effort to slow economic growth.

This is bad news for NIO as high interest rates tend to encourage investors to sell out of high-risk assets like growth stocks. This is because they can achieve higher risk-free returns. In addition to this, it has over $20bn in debt on its balance sheet, which could be magnified as rates increase. The stock fell 4.6% on the news, with the S&P 500 falling a slightly smaller 4%.

NIO also faces threats from Chinese regulators. The Chinese government has been placing tariffs on some of its largest companies since late 2020 in an effort to limit their power. This has resulted in the stock facing delisting concerns in the US. It has undertaken secondary listings in Hong Kong and Singapore to counter this issue, but it remains a threat.

The verdict

Overall, I think the positive reaction to the product unveiling will provide only a temporary boost for the shares. As inflation and interest continue to rise across the world, I think NIO stock could fall. Therefore, I won’t be buying right now.

The post NIO stock is rising: should I buy now? appeared first on The Motley Fool UK.

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Dylan Hood 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.

Arrival (NASDAQ: ARVL) is an electric vehicle manufacturer that primarily produces lightweight commercial vehicles such as buses and vans. It plans to price its EVs the same as its petrol and diesel equivalents. With van production coming soon, I will be assessing whether to buy more shares in this EV growth stock for my portfolio.

Electrifying prospects

Arrival has created a standard electric vehicle platform that allows it to save costs. This is because the platform serves as the foundation for multiple vehicle categories such as buses, vans, and cars. This, paired with the EV manufacturer’s groundbreaking microfactory concept, makes its manufacturing process extremely efficient. Its microfactories have interchangeable cells, allowing for production of different vehicles, and up to 10,000 vans a year. Therefore, production can be executed on scale without the need for building massive factories.

Arrival has already secured orders from several companies such as UPS, LeasePlan, and FirstGroup. Its number of letter of intents (LOI) also saw a monumental increase to approximately 134k vehicles in its latest earnings report. This goes to show that the firm is gaining traction from renowned companies globally with plenty of tailwinds.

UPS and downs

Arrival’s biggest customer by far is UPS, which is also an investor in the business itself. The courier giant placed an order for 10,000 vehicles last year, with an option for a further 10,000. Management disclosed that it expects the start of production on its Arrival vans in Q3 this year. UPS also announced on its earnings call that it’s expecting 400 to 600 vans to be delivered by the end of the year. Nonetheless, the next hurdle the EV firm faces is getting its van certified. It expects this to be completed by Q2.

As a shareholder, I will admit that I am slightly worried. The expected production numbers this year are lacklustre to say the least. With the company continuing to burn cash without any revenue, 400 to 600 vans isn’t going to cut it. Although CFO John Wozniak mentioned that Arrival expects to end the year with $150m in cash, he also reiterated the firm’s intention to raise capital in the near future. This is to allow Arrival to scale production to meet its ever-increasing LOI numbers.

The Arrival share price is already sitting at penny stock levels, so any equity funding would be a waste at this price. As such, the company will most likely have to take on debt, which isn’t ideal in a high interest environment.

Delayed arrival

To add to my worries, Arrival is yet to announce the confirmation of its bus certification. This was expected to be completed by Q1. Additionally, the company has also postponed the release of its full financial results twice. These factors don’t bode well for its reputation. As a result, I am worried that Arrival may not even be able to hit its van production targets. Consequently, due to Arrival’s complacency, I will not be looking to buy more shares in this EV growth stock for my portfolio.

The post Could this EV growth stock be about to explode? appeared first on The Motley Fool UK.

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John Choong owns shares of Arrival at the time of writing. 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.

Tesla (NASDAQ: TSLA) shares have had a good week, up 19% over the past five days. The primary driver behind this is the new ‘gigafactory’ which has just been opened in Berlin. While this is good news in the short term, Tesla shares are still down over 16% year-to-date (although they’re up almost 60% over the past year). So, is now the right time for me to be adding the stock to my portfolio? Or should I be steering clear of the world’s biggest EV manufacturer? Let’s take a closer look.  

Reasons to be cheerful

Firstly, as mentioned, the firm has just opened a new plant in Berlin. Tesla has reportedly already hired 3,000 out of the 12,000 expected workers, so things are definitely moving in the right direction. Once the factory is at full capacity, it will be able to produce 500,000 cars annually. To put this into context, Tesla produced 930,422 cars globally in 2021, so the new factory is a huge step forward in ramping up production.

In addition to this, the firm has already been posting some excellent results. In the 2021 Q4 results, revenues reached $15.9bn, rising 71% year-on-year. A 6% rise in margins also allowed profits to rise to $4.8bn, up 118% from the same period in 2020. Tesla is also flush with over $5bn in cash and negligible debts.

Tesla shares valuation

One concern I have always had about Tesla shares is their overvaluation. The stock currently has a price-to-earnings ratio of 204. Most good-value stocks operate with P/E ratios of under 10! In addition to this, Tesla’s competitors General Motors and Toyota trade on P/E ratios of 6.5 and 9.5, respectively.

Headwinds for Tesla shares

One big risk I see for Tesla shares is the threat of rising inflation and interest rates. Both are creeping up across the globe, with the UK and US central banks both hiking rates in the last week. The problem for Tesla is that when rates rise, investors tend to pull their money out of high-growth stocks, as they can generate higher returns from safer assets. This factor could stunt the future growth of Tesla shares.

In addition to this, supply chain shortages have been causing havoc across the EV industry. These shortages have been amplified by the covid-19 pandemic. Tesla released a statement in their Q4 report explaining that “factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through 2022”. This could be a big factor that could hold the shares back from future growth.

What I’m doing now

Overall, I think Tesla is a great company. However, in my opinion, the shares are vastly overvalued and have been since mid-2020. While I don’t think this will change anytime soon, it doesn’t mean the shares won’t continue to rise. That being said, the threats above could stunt growth. For these reasons, I won’t be adding Tesla shares to my portfolio.

The post Tesla shares are rising: should I buy now? appeared first on The Motley Fool UK.

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Dylan Hood 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.

NIO (NYSE: NIO) stock has been super-volatile over the past month. However, things seemed to be going right for the Chinese EV giant last week, as the shares climbed over 38%. This was mainly due to news breaking that China has agreed to cooperate with the US to create more stability for listings overseas.

While this is good news, the shares are trading over 50% lower than this time last year. In addition to this, they’re down over 37% year-to-date, which is pretty bad by any standards. So is now the right time for me to add more NIO stock to my portfolio? Or should I be avoiding this volatile EV stock? Let’s take a look.

Bull case for NIO

NIO is a standout performer when it comes to growth. The firm has consistently delivered high growth in vehicle deliveries in almost every report it has issued in the last few years. In its January delivery update, it highlighted its deliveries had climbed over 33% compared to the previous year, with numbers reaching 9,652. This growth was also seen in its February update, where deliveries rose by 9.9% year-on-year. Broadening the horizon to the whole of 2021, deliveries saw a near 110% rise from 2020 levels.

Headwinds for NIO stock

I see three main headwinds that NIO stock will have to contend with over the next few months:

Firstly, rising inflation has forced central banks across the world to hike interest rates. Just last week, the UK and US raised rates to 0.75% and 0.25%, respectively. When rates rise, people can earn a higher return on their savings and hence steer away from riskier investments such as high-growth stocks. This could turn investors sour on NIO.

Secondly, the business has been struggling in the face of regulatory tensions. China has been clamping down on Chinese companies listed on US exchanges for some time now, and it has been weighing on the NIO valuation big-time. However, this risk seems to have been partially mitigated since NIO issued secondary shares on the Hong Kong Stock Exchange.

Thirdly, NIO has struggled with supply chain shortages for some time now. Semiconductors were in scarce supply even before the pandemic struck, and this shortage has been amplified by pandemic-related supply chain issues. These shortages caused it to suspend production in October 2021, which led to a 65% decline in total deliveries. If this risk persists, it could struggle to keep up its high growth.

What I am doing now

I have been a holder of NIO stock for some time now, and I still have long-term optimism for the firm. However, in the current climate, the shares seem too volatile for my liking. I think in the short-to-medium term there are too many factors pitted against NIO and hence I wouldn’t be surprised if the shares drop lower. Therefore, I won’t be adding more of the stock to my portfolio today.

The post NIO stock soared 38% last week. Should I buy now? appeared first on The Motley Fool UK.

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Dylan Hood owns shares of NIO Inc. 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.

Tesla (NASDAQ: TSLA) shares reached their all-time high of $1,229 in early November 2021. However, since then the electric vehicle (EV) giant’s shares have tumbled almost 32%, currently sitting at $838. What’s more, in 2022 alone the shares are down 30%.

In an uncertain economic environment, do Tesla shares have what it takes to climb back above $1,000 during 2022? And as such, should I be considering adding the shares to my portfolio? Let’s take a closer look.

Reason for November price jump

The main reason why Tesla shares skyrocketed in November was due to a partnership announcement with Hertz. The car rental giant said it would be buying 100,000 Tesla vehicles to add to its fleet throughout 2022, which is expected to equate to a healthy $4.2bn for Tesla. This injection of cash throughout the year should help Tesla deliver more solid results.

In addition to this, in September 2021, the firm’s Model 3 sedan topped total new car sales in Europe, becoming the first fully electric vehicle in history to do so.

Growth in 2022

On 26 January 2022, Tesla released its 2021 Q4 results. Revenues came in at $15.9bn, up 71% year on year. In addition to this, profits rose an astounding 118% compared to Q4 2020, with margins rising over 6% in the process. Tesla is also in a great spot financially, with $17.6bn cash and negligible debts.

Although these results were extremely encouraging, Tesla shares dropped over 10% in the days after their release. This was largely due to wider issues concerning supply problems after Tesla affirmed that its “own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through 2022”. These supply issues are likely to be a threat to Tesla shares climbing back to $1,000.

Why I am not a fan of Tesla shares

It’s no secret that the Tesla share price is high and heavily overvalued, especially when considering its fundamentals. Tesla shares currently trade on a price-to-earnings (P/E) ratio of 171. For context, good value stocks usually trade on P/E ratios of under 10.

With such a high valuation comes volatility. As my fellow Fool, Cliff D’Arcy mentioned, between March 13 and March 20 back in 2020, the stock moved by over 12% every day, primarily due to high volume options trading. I’d be lying if I said this volatility didn’t worry me.

In addition to this, rising global interest rates are placing big pressure on growth stocks. When rates rise, people turn away from riskier investments, and hence valuations drop. For context, the S&P 500 Growth, a high-growth index, has dropped almost 15% in 2022. With Tesla’s high valuation and volatile price movements, I think interest rates pose a real threat to the shares.

Overall, I am sceptical about whether Tesla shares will be able to climb back above $1,000, especially considering supply chain shortages and the threat of rising interest rates. Although the firm continues to see great results, I think those broader factors outweigh any positives. Therefore, I won’t be adding any Tesla shares to my portfolio today.

The post Will Tesla shares climb back above $1,000 in 2022? appeared first on The Motley Fool UK.

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Dylan Hood 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.

I’ve said before that Lucid has some really nice EVs (its Air model won the 2022 MotorTrend Car of the Year award) that could potentially help the company capture market share from Tesla. Has today’s share price fall created a buying opportunity for me then? Let’s take a look.

Why Lucid’s share price is down today

Looking at Lucid’s Q4 results, it’s not hard to see why the stock is down today.

For starters, guidance for 2022 was reduced significantly. Previously, Lucid was expecting to produce 20,000 vehicles this year. However, it has reduced its guidance to between 12,000 and 14,000 vehicles, due to supply chain constraints and component quality issues. This is obviously very disappointing as it means that revenues for 2022 will be far lower than investors had been expecting. 

Secondly, Lucid said that it will delay its second vehicle, an electric SUV called Gravity, to the first half of 2024. This was initially expected in 2023. CEO Peter Rawlinson said the delay is to refine the product, and provide more time to implement best practices from the launch of its first vehicle.

At the forefront of the EV revolution

There were also plenty of positives in Lucid’s results, however.

One was that customer reservations now exceed 25,000 units, reflecting potential sales of more than $2.4bn. That’s up from 17,000 units in November. This suggests that demand for the company’s EVs is high at present.

Another was that Lucid confirmed plans to build its first international assembly plant in Saudi Arabia. This is expected to begin production in 2025. The group believes this plant will help it achieve capacity of 500,000 in the years ahead. 

Additionally, management seemed very confident about the future. “We are at the precipice of a global transition toward electric vehicles, and Lucid, with our leading technology and design, is at the forefront of one of the most significant transformations in mobility in generations,” said Rawlinson. “We remain confident in our ability to capture the tremendous opportunities ahead given our technology leadership and strong demand for our cars,” he added.

This confidence from the CEO is very encouraging, in my view.

Should I buy Lucid stock now?

As for whether now is a good time to buy Lucid stock, however, I’m still not convinced that the valuation is attractive.

Even after today’s share price fall, Lucid still has a market cap of around $40bn. That strikes me as high for a company that has only produced around 400 EVs to date and is having some production issues. 

And I’m not the only one who sees the valuation as high. Morgan Stanley analyst Adam Jonas, for example, has a $16 price target on the stock. That’s much lower than the current share price.

Meanwhile, short sellers clearly believe the valuation is too high as well. At present, around 137m Lucid shares are on loan. That represents about 25% of Lucid’s free float – a very high level of short interest.

Given the high valuation, I’m going to leave Lucid stock on my watchlist for now.

All things considered, I think there are better growth stocks to buy at the moment.

The post Lucid stock just tanked. Is this a great buying opportunity? appeared first on The Motley Fool UK.

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Edward Sheldon 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.

Personally, I’m not surprised by the poor performance in this area of the market. One of my stock market predictions for 2022 was that small EV stocks would underperform. Has the recent weakness across the EV sector provided a buying opportunity for me though? Let’s take a look.

What’s next for Rivian and Lucid?

While EV stocks like Rivian and Lucid have all bounced a little recently, I think downside risk remains.

For starters, valuations are still quite high, even after January’s falls. At present, the market capitalisations of these companies are $63bn and $46bn respectively. Meanwhile, the forward-looking price-to-sales ratios of these companies are 18 and 21. Given that both EV companies have only produced a small number of vehicles, I see these figures as very high. If they suffer from operational challenges (like semiconductor shortages), their share prices could take a big hit.

Secondly, both of these companies are generating big losses right now and aren’t expected to turn a profit for years. In 2022, analysts expect Rivian to post a net loss of $4.7bn and Lucid to post a net loss of $1.7bn. Recently, appetite towards the stocks of unprofitable companies has really deteriorated due to the fact that the US Federal Reserve is in a tightening cycle. I think sentiment towards these kinds of stocks could get worse before it gets better.

Look out for the short sellers

Finally, both of these EV stocks have very high levels of short interest right now, which indicates that hedge funds and other sophisticated investors are betting that their share prices will fall. At present, Rivian has short interest of around 23% while Lucid has short interest of around 20%. I tend to view a short interest figure of more than 5% as a red flag because it signals that a lot of short sellers are downbeat on the stock. And that’s not a good thing as short sellers tend to do their research.

Of course, short sellers don’t always get it right. However, they’ve certainly had success with small EV stocks in the last year. Nikola, Workhorse, and XL Fleet are just some of the EV stocks that have been targeted by them. All are down more than 70% over the last year.

Better stocks to buy

I’ll point out that both Rivian and Lucid are exciting companies that have excellent products. I expect these companies to generate strong sales growth over the next few years as EVs go mainstream. Both could potentially capture market share from industry leader Tesla.

However, to my mind, neither EV stock offers a favourable risk/reward proposition right now. So, they’re not on my ‘best stocks to buy’ list at present.

The post Rivian and Lucid shares have tanked. This is what I’m doing now appeared first on The Motley Fool UK.

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Edward Sheldon 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.

Shares in Chinese electric vehicle (EV) manufacturer NIO (NASDAQ:NIO), which are listed in the US, have had a very poor run recently. This year, NIO’s share price has fallen 25%. Meanwhile, over the last 12 months, it has fallen nearly 60%.

When I last covered NIO stock, near the $40 mark, I had concerns about the valuation. But after the recent share price fall, the valuation is a lot lower. Is now the time to buy NIO for my portfolio? Let’s take a look.

Is it time to buy?

While NIO’s share price has taken a big hit recently, the growth story here still appears to be intact. In 2021, for example, the firm delivered 91,429 vehicles. That represented growth of 109.1% year on year. Meanwhile, the group’s January 2022 update showed that it delivered 9,652 vehicles last month. That represented growth of 33.6% year on year.

It’s worth pointing out, however, that growth has slowed considerably recently. If we go back to the January update from last year, it saw growth of 352% year on the year for the quarter. This slowdown is something to keep in mind.

Is NIO stock cheap?

As for the valuation, this doesn’t look so excessive anymore.

NIO doesn’t have a price-to-earnings (P/E) ratio as it doesn’t have any earnings yet. But it does have a price-to-sales (P/S) ratio and that’s a little under four on a forward-looking basis. That actually seems quite reasonable to me.

To put that number in perspective, Tesla, Rivian, and Lucid, have P/S ratios of around 11, 17, and 22, respectively. So, on a relative basis, NIO stock actually appears to offer some value right now, in my view.

Risks to consider

There are risks to consider here though.

I still think competition from rivals is a major risk. What many people don’t realise is that there are a lot of EV manufacturers operating in China today including BYD, Xpeng, SAIC Motor, Ford, Tesla, and Porsche. So, there’s no guarantee that NIO will be a big player in the Chinese EV market. 

It’s worth noting that the average selling price of a NIO vehicle is currently about $70,000. This means a lot of Chinese consumers won’t be able to afford its EVs for now.

Could the regulators come for it?

Another issue is regulatory risk. Recently, Chinese regulators have been cracking down on companies listed in the US. As a result of pressure from regulators, Didi Global – which is seen as the ‘Uber of China’ – recently announced that it would be delisting from the US market. Could the same thing happen to NIO? We can’t rule it out.

Better stocks to buy

Given the risks here, I’m going to keep NIO on my watchlist. I do think there’s some value on offer at the moment. However, given the risks, it doesn’t make my ‘best stocks to buy’ list right now.

The post Down 25% this year, is NIO stock a buy? appeared first on The Motley Fool UK.

More reading

• Is NIO stock the next Tesla?
• Jim Cramer is bullish on NIO stock at $5! Should I buy it for my ISA?

Edward Sheldon 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.