To The Moon

NIO stock

The plot has just thickened for $NIO Inc.(NIO)$ and other electric vehicle companies. Nio stock price is hovering near the lowest level since 2020, meaning that it has plunged by more than 87% from the highest point during the pandemic.

The bull vs the bear case

Analysts are torn about the Nio share price considering that it has lost over 90% of its value in the past few months. A look at the most recent ratings shows that only a handful of them are excited about the company. Those at Deutsche Bank, Citigroup, and Bank of America have a bullish view of the stock.

These analysts believe that Nio’s business will continue doing well in the long term as it gains market share in China . They also cite the fact that China has committed to transition fully into electric vehicles in the next few years. As such, with its first-mover advantage, they compare Nio to be the next Tesla. Further, bulls argue that Nio’s stock is undervalued as it is trading at a deep dicount to Tesla.

Most importantly, the company’s delivery numbers have been strong. In the fourth quarter, the company delivered aa record 40,052 vehicles, a 60% increase from the previous year. It hopes to ramp national and international deliveries soon.

Most recently, analysts at Mizuho, Morgan Stanley, JP Morgan, and Barclays have decided to downgrade the stock. Those at Morgan Stanley slashed their estimate from $16 to $12. Bearish analysts cite the growing competition, especially from the likes of BYD, XPeng, and Li Auto.

Another bearish catalyst is that analysts have continued to downgrade their revenue and profitability metrics. revenue expectations for this year have dropped to $12.42 billion from over $15.5 billion a year ago. Similarly, EPS estimates have been dropping, as shown below.

Nio estimates

Tesla earnings as negative catalyst

The main bearish case for Nio stock price is the recent Tesla results that I wrote about here . The company, which is the biggest player in the EV business, said that its revenue and profitability metrics were a bit lower than expected. As a result, the stock dropped by more than 5% in extended hours.

These results mean that other EV stocks could follow it lower. In fact, Nio stock price has dropped by more than 1% in the premarket. Xpeng, Rivian, and Lucid Motors stock prices have also dropped since these companies tend to follow Tesla’s footsteps.

Nio stock price technical analysis

Nio stock price

So, is it safe to buy Nio stock ? On the daily chart, we see that the Nio share price has been under pressure in the past few months. It is now sitting close to the lowest point level this year. The stock has moved below all moving averages while the Average True Range (ATR) has continued falling, signaling that volatility has dropped.

Nio has also also formed a small descending triangle pattern. Therefore, there is a likelihood that the stock will have a bearish breakout soon. If this happens, the next level to watch will be at $7. As such, in the battle of bulls vs bears, I think that Nio bears will prevail.

source:Invezz