Sign InNIO Stock Shows Promising Growth Potential Despite Negative Earnings, Rated 'Buy' by Analysts
Summary
NIO Inc. closed at $11.16 on July 12, 2023, with a 3.24% increase compared to the previous trading day, and is predicted to continue its upward trend due to positive technical signals and recent investments, although caution should be taken due to high volatility associated with growth stocks like NIO.
GENERAL OVERVIEW
NIO Inc., ticker symbol NIO, is currently traded on the New York Stock Exchange (NYSE). It closed on July 12, 2023 at $11.16, which is an increase of $0.35 or 3.24%, compared to the previous trading day. The stock varied between a low of $10.71, and a high of $11.22 on the trading day where it experienced a high trading volume of approximately 60.70 million shares, which is above the average volume of 54.73 million shares.
TECHNICAL ANALYSIS
The 14-day Relative Strength Index (RSI) of NIO stock is 71, that indicates the stock is neither overbought nor oversold territory. The 50-day Moving Average is at $8.53, and the 200-day Moving Average is at $10.33. The Moving Average Convergence Divergence (MACD), a momentum oscillator, for three months stands at 0.67 points. These technical indicators suggest that the stock is currently trending upwards since the stock is trading above both the 50 and 200-day Moving Averages, and the MACD is positive.
FUNDAMENTAL ANALYSIS
The Market Capitalization of NIO is approximately $18.83 billion, with 1.69 billion shares outstanding. The Negative Earnings Per Share (EPS) of $-1.67 and negative Price-to-Earnings ratio (P/E) of -6.68 indicate that the company is not yet profitable.
FINANCIAL FORECASTS
The Discount Cash Flow (DCF) of NIO is estimated at $23.31 per share, indicating potentially undervalued stock as per the intrinsic value of the company. As given by analysts, the targets for NIO range from a low of $13 to a high of $83, with a median share price target of $31.30. The consensus target from analysts is $35.15, which suggests a significant upside potential from the current stock price.
NEWS ANALYSIS
Recent news indicates that NIO has confirmed the closing of a significant $738.5 million investment from CYVN Investments, majority-owned by Abu Dhabi's government, which could provide the company a substantial financial lift. Additionally, the company is experiencing a noticeable surge in its share price, raising concerns of overvaluation. Lastly, the cancellation of a key pact between Chinese automotive companies, including NIO, might lead to increased competition and pressure on profitability.
STOCK PREDICTION
Based on the relative strength of the company's technical signals and the positive news flow, the share price is predicted to continue with the upward trend in the next trading day, July 13, 2023. However, fluctuations throughout the week can be anticipated due to potential market volatility and the range of analyst targets.
FINAL EVALUATION AND RATING
While the negative EPS and P/E ratio are potential causes for concern, significant future growth is predicted for NIO, especially considering the approaching era of Electric Vehicles. The injection of significant investment, the increasing demand for EVs, and the positive technical signals, all suggest that NIO is well-positioned for future growth. Given the significant difference between the current stock price and the DCF as well as analyst target prices, NIO is rated as a "Buy" at the current level. However, investors should proceed with caution due to the high volatility associated with growth stocks like NIO.
