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Should I invest in Nio stock after tumbling 40% off highs?

By: Invezz
Image for Nio Inc Europe

Shares of Nio (NYSE: NIO) have extended a decline this week to trade about 10% in the red. Last week, shares of the electric vehicle (EV) maker crumbled almost 17%.

Fundamental analysis: Cutting production in Q2 due to chip shortage

EV startup Nio said it will slash production in the second quarter due to a global shortage of semiconductor chips. Semiconductor chip production has sustained a backlog as a result of increased demand for electronics and gadgets during the coronavirus pandemic.

This also forced global carmakers to cut production as well, including China’s Nio. Nio has boosted manufacturing capacity last month to 10,000 vehicles, up from 7,500 in January, said the carmaker’s founder William Li in a quarterly earnings call. 

However, this means that chip and batteries deficit will force Nio to lower back production to the 7,500 level in the second quarter, Li said.

He added that he expects production capacity to increase in July and that the carmaker will produce a total of 150,000 vehicles this year under one work shift. That figure could double early next year to 300,000 units a year under two shifts, Li said. 

On the other hand, the automaker reported better sales than its EV startup rivals. Nio shipped 7,225 vehicles in January and 5,578 in February during the Lunar New Year holiday. The company expects to deliver a minimum of 7,197 vehicles in March, and a total of 20,000 – 25,000 cars this quarter. 

Technical analysis: Where to buy?

Shares of Nio dropped earlier this week after the EV carmaker reported a fourth-quarter loss of 0.93 yuan ($0.14) a share, to miss on the analysts’ estimates of a loss of $0.07 per share.

Nio (NIO) weekly chart (TradingView)

Nio stock price fell around 10% this week to extend a decline following a print of the record highs of $66.99. The price action closed yesterday at $41.53, meaning that the stock trades nearly 40% off the highs at the moment.

The next horizontal support comes at $38.40 for EV investors looking to buy Nio stock.

Summary

Carmaker Nio said it will cut production in the second quarter as a result of global shortage of semiconductor chips, sending its shares further lower. 

The post Should I invest in Nio stock after tumbling 40% off highs? appeared first on Invezz.

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