If you are wondering if this is the bottom for Nio (NYSE: NIO) stock it might be. The price action has corrected significantly over the past 2 years and there are signs of bottoming once again. The caveat is that we’ve seen this stock try to bottom before and not do it so there is risk in the outlook.
The questions that need to be answered are what caused the implosion and why the stock might move higher. To answer the first question, the company is producing cars and ramping up production but failing to meet its very high expectations with no help from COVID, and the outlook soured.
As for the second, the company was able to beat even its lowered outlook for Q4 deliveries, and there are signs of COVID easing in China. Together, this has the outlook for Nio brightening, and the stock is ready to move higher.
Nio Posts Record Deliveries For December
Nio has been ramping production all year, as seen in the sales data. The company's deliveries in December were 15,815, which is up 50.8% versus last year, and it is among the EV market leaders in China in regard to growth. This is a record for the company, and Q4 sales are up 60% versus last year and FY deliveries are up nearly 35%.
Assuming December’s production level is sustained in the current quarter, deliveries could easily top 47,000 and produce growth near 85% versus last year.
The factor moving the stock now is the performance relative to the company’s recently reduced guidance. Nio lowered its delivery target for Q4 in late December and beat it by more than 100 basis points. This is a slim margin of outperformance, but a sign of strength nonetheless and an indication that easing COVID-19 restrictions in China is having a positive impact on sales.
The Analysts Are Buying Nio Stock
The analyst sentiment in Nio has held firm over the last year even as the price targets were cut. The Marketbeat.com consensus rating has been firm and steady and a Moderate Buy all year while the price target fell about 66%.
The takeaway here is the low price target, which was recently set, suggests the stock is fairly valued at current prices, while the consensus of $22.89 suggests more than 110% of the upside is available for new investors. The consensus is down from last year but hit bottom after the Q3 earnings release and has since begun to move higher. This should help support the stock soon and could turn into a tailwind if it develops into a longer-term trend.
The institutions were selling Nio stock early in 2022 but quit going into Q4 and have yet to resume the trend. If they revert back to buying, it would be another tailwind for the market. As it is, the institutions own about 30% of the company.
The Technical Outlook: Nio Is At A Key Support Level
The price action in Nio hit bottom in late October, coinciding with an important technical break out in 2020. This level is a key support level that, if broken, would open the door to a substantial decline. If, however, the market can establish a firm bottom at this level, the stock should bounce back to the $21 level sometime over the next few quarters (assuming results are as expected).