Sign InNIO Inc. Faces Mixed Bag of Potential and Challenges, Stock Rated as Hold
Summary
NIO Inc., an electric vehicle manufacturer, has a positive outlook in the near term due to rebounding vehicle delivery sales and higher gross margin projections, but investors should consider currency risks and the company's progress towards its delivery targets before buying the stock. (Analysis date: July 03, 2023)
Fundamental Analysis
NIO Inc., an electric vehicle (EV) manufacturer listed on the NYSE, closed at $10.03 on July 03, 2023. The recent closing price represented a change of 0.34 (3.51%) with a low and high price for the day of $9.79 and $10.49 respectively. The annual high and low for the stock were $23.28 and $7 respectively. With a market capitalization of $16.93 billion, NIO Inc. issued a total of 1.69 billion outstanding shares. The company, however, reported a negative EPS of -1.47, indicating a negative PE ratio of -6.82, which suggests the firm is not currently profitable.
As per recent news, NIO Inc.'s vehicle delivery sales rebounded in June following a few weak months. It further forecasts a strong second half in terms of vehicle deliveries, aligning with a marked improvement in gross margins. This positive outlook is also underpinned by the $740 million cash infusion the company recently received. However, the company faced a minor setback as it delivered 23,520 vehicles in the 2nd quarter, slightly less than the previous year. Despite these challenges, NIO aims to double its vehicle deliveries to 245,000 in 2023.
Having met slightly over 20% of its ambitious target in the first half of the year, the company is expected to ramp up production and deliveries in the upcoming months. However, the strengthening US Dollar against the Chinese Yuan poses a significant challenge to NIO's financial performance.
Technical Analysis
The RSI14 indicator stands at 67, suggesting the stock is nearing overbought levels. The MACD (3-month) value is positive at 0.572899 and it further indicates that buyers are controlling the market in recent days. The 50-day moving average (MA) of the stock price is $8.2736, which is lower than the last closing price, and this signals a positive market trend. However, the 200-day MA is higher than the current stock price at $10.6361, implying that the stock is in a long-term downtrend.
The company predicts future high and low stock prices to be $83 and $13, respectively, with a consensus forecast at $35.15 and a median forecast of $31.3. The company's DCF is calculated at $22.18, indicating the company's intrinsic value to be higher than its current market price.
Outlook
Based on the provided data and taking into account both the fundamental and technical aspects, the stock price of NIO Inc. for the upcoming trading day (July 05, 2023), could remain above the 50-day MA, considering the positive sentiment and higher gross margin projections. This would reflect a positive outlook for the company in the near term.
In terms of a weekly outlook, the overbought position of the RSI14, combined with the forecasted delivery improvements and financial injection, could push the stock price towards the DCF value of $22.18. However, the possibility of further US Dollar strengthening, and the long-term downtrend signal from the 200-day MA need to be factored in, and could lead to fluctuations in the stock price.
Final Evaluation
NIO Inc.'s current market situation presents a mixed bag. On one hand, the company showcases significant potential with a rebound in delivery sales and the recent cash infusion. On the other hand, it faces headwinds in the form of foreign exchange risks and operational challenges. Given these considerations, the stock stands as a "Hold". As NIO Inc. makes progress towards its delivery targets and makes use of its cash infusion for efficient operations, its stock could be reevaluated as a "Buy". However, investors still need to monitor the currency risks and the company's progress towards its delivery targets.
