NIO Stock Forecast: EV Stocks Crash, Will NIO Fall Below $10?
NIO Stock Price
NIO Stock Performance
- 5 Days: +3.3%
- 3 Month: -34.9%
- YTD: -62.4%
NIO Stock Forecast: Technical Analysis
On the last trading day, most of the Chinese electric vehicle and scooter stock plunged. Shares of NIO were down 5% while XPENG lost around 6%. The fall in stock price came despite the Chinese Government deciding to ease the current Zero-Covid norms and let the lives of people return to normal to some extent. The main reason for this decline is that the steps taken might be too late as the restrictions imposed by the Chinese Government have already harmed the deliveries to a larger scale. We analyze the NIO stock future on a technical chart:
Among the EV stocks, NIO has been one of the better-performing stocks in 2022 but the downside of NIO shares started in the mid of September, and the price of NIO shares bottomed to a yearly low in the last week of October. NIO shares were valued below $10.
There has been a marginal recovery in the first week of November when the shares went above $12. In the last 24 hours, NIO has once again lost momentum and now it is once again moving negatively on the 4-hour chart. NIO is trading above the 50-day Moving Average which is a good indicator, as more sellers have entered the market there are higher chances of short-term traders shorting the market.
The support for NIO is $12.06 and if it fails to hold on to this support, NIO shares are set to fall below $10 finding support at $9.24. The first level of resistance for NIO stock is $13.30.
Relative Strength Index: The RSI for NIO stock is not much encouraging. There is a pullback after touching the limit of overbought territory as more sellers have taken control of the market.
Recommendation: For the next trading day the momentum of NIO stock is bearish and the trade recommendation is a Sell.
Reasons for a dismal performance in 2022- The year 2022 has not been a great year for Nio Inc. It fell more than 60% in 2022. It has underperformed S&P 500, which is down by only 22.44 %. The sell-off is driven by multiple factors, which are likely to continue for the first half of 2023.
With rising bond yields and a looming recession in the US and around the globe, investors are shying away from riskier growth stocks. Add to it, not so good Q2 results of Nio Inc, wherein it reported a loss of RMB 2.76 billion. Gross margins also took a hit to 16.7% from 20.3% in the year-ago quarter. A major reason for falling gross margins is supply chain issues, which have considerably increased the company’s cost.
China has also faced severe lockdowns due to the resurgence of Covid in the country which has added fuel to supply chain issues and cut the production targets of companies like Nio Inc. The US is facing a high inflation environment and FED is continuously increasing interest rates.
Nio’s share price tumbled due to these factors. A couple of them is likely to continue in 2023. For example, supply chain issues are still present although Nio is taking steps to overcome them. Fed will still keep the rates high in 2023 first half. All these factors pose a difficult environment for Nio to start 2023.
Factors that will affect NIO Share Price in 2023
Deal with Australian lithium producer Greenwing Resources- Nio Inc recently invested in the Australian-based lithium company. EV maker will own 12.16% of the stake in Greenwing and as it is more than 10%, it also enjoys the right to be nominated in the company’s board of directors. The proceeds from the purchase will be used in the exploration project of Greenwing in San Jorge.
The purchase by Nio is a step towards securing battery raw material supply lithium in the long run. In the long run, Nio plans to develop in-house batteries and also to strengthen the battery swap network. Battery swap technology is Nio’s Battery as a Service (BaaS) strategy, in which the battery can be replaced in about three minutes. Also, a vehicle can be purchased without a battery, which reduces the cost of the vehicle significantly. It has given an edge to Nio over its peers.
A single deal with not solve all the supply chain problems, but it is a step in the right direction and Nio can take advantage of this deal in 2023 in a major way.
Nio Berlin 2022- Another positive factor for Nio Inc entering into 2023 is the expanding global presence of Nio in other countries. Recently, on October 7th, 2022, Nio Inc hosted Nio Berlin 2022. It is the European version of Nio day. The company unveiled ET5, ET7, and EL7 (renamed version of ES7 from China because of a branding dispute with Volkswagen’s Audi) models at the event.
The interesting thing is that the Chinese maker plans to only lease a car in four countries in Europe, i.e., Germany, the Netherlands, Sweden, and Denmark. Nio Inc plans to work on a subscription model wherein a 75-gigawatt-hour battery can be leased for 1199-1295 euros a month. It is an unconventional move by the company to capture the European market so that people can get a feel of Nio cars at a smaller amount if they hesitate to invest big in new company cars.
This move will either make or break Nio’s future in Europe and hence will impact Nio’s share price in a major way in 2023.
Geopolitical Tensions between US and China- Nio Inc is indeed expanding its global presence in countries like Norway, and Germany, but it is still a China-based country and of late, tension is mounting between US and China for geopolitical reasons. The US is putting sanctions on Chinese companies to stop imports. Also, talks are going on to delist the Chinese companies’ ADR from the US stock market. That would be disastrous for Nio shares.
The US government has also put sanctions on local companies to stop the chip trades from companies in China and Taiwan. This will further aggravate the supply chain problems for Nio and can take a hit on Nio’s share price in 2023.
Support from the Chinese Government- One prominent reason for the downfall of Nio Inc and other technology companies in 2022 is the absence of support from the local government. Of late, the Chinese government became stricter in its oversight of technology and has wiped out $1 trillion for Chinese tech companies, according to a report from Bloomberg.
But recently on October 7th 2022, China President Xi Jinping made an optimistic speech for the tech sector and laid out plans for the next five years for China. He pointed out the need to focus on developing the core technologies indigenously. Investors assumed that it is a signal to focus more on core technologies including electric vehicles. It is a shift in tone towards the tech sector which will be fruitful for companies like Nio Inc going into 2023.
Is NIO a Buy for 2023
Nio shares were a super performer in 2020 and early 2021. The share price rose from a little above $3 to more than $60 in less than a year and it was seen as a possible competitor of Tesla. Two years down the line, the share price has crashed back to lows of $11. Investors are still in a risk-averse mode and are avoiding stocks with very high valuations.
The biggest disadvantage with Nio right now is that it is still an unprofitable company and it is not expected to be one in the least next two years. Although profit margins have improved over time, it is still reporting sizable losses in every quarter result.
Although Nio is in a much better position compared to Lucid and Rivian in terms of production and delivery targets, former companies still struggling to scale up production. But I am still skeptical about Nio Inc as an investment in 2023 simply because of geopolitical tensions between USA and China which could escalate anytime in the coming year.
NIO Stock Forecast for the next 12 Months
|The average forecast for the next 12 months||$27|
NIO Stock Forecast Today
|1. Market's Wisdom||Neutral|
|1a. Market Data||Partially Negative|
|1b. Technical Recommendation||Buy|
|2. Crowd's Wisdom||Positive|
|2a. Social Media Buzz||Higher|
|2b. Social Media Sentiment||Higher|
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