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NIO (NYSE:NIO) stock has fallen sharply since the start of 2021. The electric vehicle (EV) maker was once hailed as the next big thing but has struggled, causing some investors to throw in the towel. this assignment. So is there any growth potential left that makes it worth considering?
Why is the battery low
First, it is important to understand why the stock price is underperforming despite performing in the growth sector. The 28% decline in the past year can be put down to three main reasons. First, competition in the EV space has increased dramatically. In addition to other EV specialist firms such as TeslaNIO’s been competing with more traditional automakers that are scrambling to offer customers a mix of full EV options.
Another impact has been poor financial performance. Back in November, quarterly results showed a net loss of $710m, up from a loss of $639m from last year. This was also worse than analysts had expected. If a business cannot make a profit for a sustained period of time, it is not doing well.
Finally, NIO’s a Chinese company, headquartered in Shanghai. Broader problems with China’s economy have hampered progress, as some investors have abandoned stocks as they see it as a plan to boost the economy.
An optimistic view
But there may be significant growth potential left in NIO shares. First, production numbers are increasing. Earlier this month, the company released more information on last year’s delivery numbers.
In December, 31,138 vehicles were delivered, a jump of 72.9% compared to the same month in 2023. Looking at the year as a whole, 221,970 vehicles were delivered, which is an increase of 38.7% from 2023. This shows an increase in demand, increasing income.
This would indicate that if the company can maintain costs going forward, turning a profit for the year may not be too far off.
Another factor is the low share price. At $4.36, it is close to the 52-week low of $3.61. Less than that and I have to look back to 2020 to find it at the same level! On the other hand, it traded at $67 in 2021. So based on past performance, there is an argument to be made that there is growth potential there.
An important point
Of course, past performance does not indicate future returns. But if I think the company is growing, I think it’s only a matter of time before the financial results improve. It’s true that the EV space is competitive, but based on the size of the potential market, there’s a lot of money to go around. As a result, I think NIO could be a smart buy for investors to consider right now.
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