Nio (NIO) targets a booming market for electric cars. The Chinese EV startup is preparing a year-end sales push, and shares soared Nov. 11 as China eased its zero-Covid policy. Is Nio stock a buy in November 2022?
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Founded in 2014, Nio, sometimes called the Tesla (TSLA) of China, went on to deliver booming sales.
Like Tesla, Nio makes luxury electric vehicles. Unlike Tesla, Nio does not make its own EVs, instead partnering with a state-owned auto manufacturer.
Nio, Xpeng (XPEV) and Li Auto (LI) are startup rivals to Tesla in China, the world's fastest-growing EV market. Homegrown EV and battery giant BYD (BYDDF) and Volkswagen (VWAGY) are also making strides in that market.
Latest Nio News
On Nov. 11, Beijing relaxed a number of its "Zero Covid" policy restrictions, sparking a big rally for China stocks. But some major manufacturing hubs remain in partial or total lockdowns. Nio temporarily shut down production at its Hefei factories in October due to China's Covid restrictions.
A day earlier, Nio posted a far worse-than-expected Q3 loss. But the Chinese startup predicted record deliveries and revenue acceleration in Q4, defying worries about Covid curbs and EV competition.
New Nio EVs include the full-size ET7 sedan, mid-size ET5 sedan and ES7 SUV. In October, Nio officially launched those models in Europe as well, after a pilot run in Norway. Older-generation models, including the ES6, ES8 and EC6 SUVs, will be refreshed over the next year.
"In 2023, we project revenue to grow 101% on stronger sales of new models and (recent lauch) in Europe, where Nio's leasing option will increase car affordability," CFRA analyst Lim Jian Xiong wrote in a Nov. 11 note. FactSet shows that analysts on average expect 87% revenue growth next year.
The analyst maintained a buy rating on Nio stock. But Xiong cut the price target to $15 from $24, citing higher competition and China's Covid policy.
Nio targets the premium EV market but is reportedly mulling a mass-market EV. The long-rumored, affordable Nio EV could attract a new user base. Nio also plans to make its own battery packs from 2024.
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Nio Stock Technical Analysis
Nio stock leapt 11.2% to 11.39 on the stock market Nov. 11. Nio stock remain below the 50-day and 200-day moving averages and there is no buy point for now.
The once-hot EV stock also remains far below its 52-week high.
Nio stock's relative strength line is lagging. It rallied sharply for most of 2020. A rising RS line means that a stock is outperforming vs. the S&P 500 index. It is the blue line in the chart shown.
Shares earn a dismal IBD Composite Rating of 5 out of 99. The rating combines key fundamental and technical metrics in a single score. An RS Rating of 8 means that Nio has outperformed just 8% of all stocks in IBD's database over the past year.
Nio's Accumulation/Distribution Rating of D- reflects considerable selling by big investors over the past 13 weeks. As of September, 830 funds owned shares. NIO stock shows zero quarters of rising fund ownership, according to the IBD Stock Checkup tool.
Nio Earnings And Fundamental Analysis
On key earnings and other fundamental metrics, Nio lags. It's a young and fast-growing company, still looking to turn a profit.
Nio stock earns a weak EPS Rating of 1 out of 99. The EPS rating compares a company's earnings growth vs. other companies.
Nio holds an SMR Rating of D, on a scale of best A to a worst E. The SMR Rating is a combined measure of sales growth, profit margins and return on equity.
On Nov. 10, Nio widened net losses for the third quarter to 30 cents per share, worse than feared. Revenue climbed 17%, ahead of views, on record EV deliveries. Nio's guidance for 43,000-48,000 EV deliveries in the current quarter was better than feared, given lingering Covid-related supply disruptions.
In all of 2022, analysts polled by FactSet expect Nio to more than double losses to 76 cents per share. Revenue is seen jumping 32% for the year. They forecast Nio will sharply losses to 45 cents in 2023 as revenue grows 87%, amid the launch of new models and expansion in global markets.
In 2021, Nio more than doubled EV sales, despite pandemic-related supply challenges.
Out of 37 analysts covering Nio stock, 34 rate it a buy and three have a hold. No one has a sell, FactSet says.
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China EV Competition Grows
Nio targets China's market for premium electric SUVs and cars. Tesla rules that market, but Chinese EV startups are emerging as fierce competition. For now, Tesla far outsells the startups like Nio.
Nio reportedly plans to roll out a mass-market subbrand in 2023.
Besides Tesla, General Motors (GM), Ford (F) and Volkswagen sell electric EVs made in China for Chinese consumers. Volkswagen is making strides in that country's EV market, outpacing Nio's sales in the first half of 2022.
Chinese EV giant BYD (BYDDF) is another rival to watch. Even Tesla has begun to lose ground in China to Warren Buffett-backed BYD.
By 2030, EVs will make up 90% of new car sales in China, Nio CEO William Li forecasts.
While expanding capacity in China, Nio is growing overseas. It leases EVs in Europe and aims to be in 25 countries by 2025.
BYD and Xpeng are expanding in Europe and international market as well. Li Auto aims to enter Europe. Chinese EV makers are challenging Western automakers, including Tesla, on the continent.
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Outlook For Nio, EV Stocks
On home turf, China's Nio, Li Auto and Xpeng are expanding to fend off Tesla.
Led by China, global EV sales more than doubled in 2021 vs. the prior year, according to the International Energy Agency (IEA). But Nio and other China EV makers have struggled in 2022, due to Covid lockdowns and restrictions, as well as chip shortages and other supply-chain challenges.
Nio offers an innovative subscription plan for batteries. Basically, Nio sells the car and the battery separately. Users can buy Nio EVs without batteries for a lower price and "rent" batteries for a monthly fee. They also can swap car batteries based on their needs.
Nio boasts 1,047 battery swap stations in China, which have performed more than 10 million battery swaps. It has taken battery swaps to Europe, further challenging Tesla in that market.
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Is Nio Stock A Buy In November 2022?
From a fundamental perspective, Chinese EV startup Nio continues to lose money while enjoying enviable revenue growth. It's seen as a credible Tesla challenger in years to come, with strong brand power in China, a fast-growing market for electric vehicles.
For Nio, new electric cars and global expansion mean more runway for growth. But the EV wars are heating up, with BYD and Volkswagen speeding up vs. Tesla and Nio in China.
Nio is poised for a recovery in EV deliveries, as new models take off. But after the chip crisis, battery supplies could be an even bigger headache for EV stocks at large. Nio's plans to get into the battery business could offer some insulation.
Nio stock eyes a long road to recovery after a pummeling. The promising and high-growth EV stock remains far below key technical levels. However, China's lifting of some Covid-19 restrictions Nov. 11 is a positive, though its impact on Nio's supply chain and its EV sales is not entirely clear.
Bottom line: Nio stock is not a buy in November 2022.
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