The EV stock hit a 52-week low and is dirt cheap right now, but you must pay attention to a few things.
With Nio (NIO -10.16%) stock rallying 12% by the 18th of last month, investors thought shares of the electric vehicle (EV) maker had finally bottomed. Unfortunately, their hopes were dashed soon after as Nio stock made a U-turn, hit a 52-week low, and ended March 17.7% lower, according to data provided by S&P Global Market Intelligence.
What went wrong with Nio stock?
A drop in deliveries, rising losses, and a share sale sent Nio stock tumbling in recent weeks. Nio’s delivery numbers announced on March 1 were a mixed bag. Although its deliveries surged 62% year over year in February, they dropped 4.8% sequentially.
Interestingly, while deliveries under Nio’s flagship brand rose 15% over January, its mass-market sub-brand Onvo saw deliveries slip almost 32% sequentially. Days later, Nio reported a record net loss of $974 million for its fourth quarter, up 33% year over year despite 13% growth in vehicle sales.
Nio’s gross margin improved to 11.7% in Q4 from 7.5% in the year-ago quarter, but higher operating expenses ate into its bottom line as the company spent more money on marketing and promoting new brands and expanding its sales network.
Nio’s next announcement further hit the stock. Toward the end of March, Nio announced plans to sell nearly 136.8 million shares in offshore transactions for a price of 29.46 Hong Kong dollars per share. That meant a steep discount of 9.5% to the previous day’s closing price on the Hong Kong stock exchange. Nio stock tumbled and hit a 52-week low of $3.57 on March 31.
What’s next for Nio stock?
Nio is betting big on its sub-brands for growth. Onvo began deliveries of its first model, the L60 SUV, in September 2024 and is ready to launch its second model, the L90, in the coming weeks. Although Onvo deliveries fell in March, I’d wait for some quarters to see the trend since the beginning of the year around the Chinese New Year holiday is a seasonally weak period for auto sales. Meanwhile Nio’s second sub-brand Firefly will launch its first model — a compact hatchback — on April 19.
Nio’s guidance also didn’t disappoint. It expects to deliver between 41,000 and 43,000 vehicles in the first quarter, which would mean year-over-year growth of around 36% to 43%. Its Q1 revenue guidance also means potential growth of around 23% to 30% year over year.
Nio’s stock is about the cheapest it’s ever been now on a price-to-sales ratio, but you’d want to keep an eye on its costs and financials as they could decide where the stock heads next. Nio says it is selling shares to raise money for research and development of EV technologies and new products, and to strengthen its balance sheet. I’d pay more attention to the latter, since Nio is burning cash, and its current assets even exceeded its current liabilities as of the end of the fourth quarter.
Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.