Nio stock price could enter beast mode, thanks to these catalysts

Nio (NYSE: NIO) stock price continued its strong comeback this month, as we had predicted several times, as you can see here and here. It soared to a high of $6.64 on Friday, its highest level since January this year. 

Nio has jumped by over 82% from its lowest point this year. Similarly, its Singapore-listed shares surged by over 16% on Monday, reaching a high of S$8, its highest level since January 9, 2024.

Nio raises cash

Nio, like other electric vehicle company, has been a cash incinerator in the past decade as it continued to invest in its manufacturing plants.

It has also been investing heavily in its charging infrastructure and battery-swapping technology as competition in the home market jumps. 

Nio has made some substantial losses in the past decade. Data by SeekingAlpha shows that its annual loss in 2019 stood at over $1.6 billion, a figure that jumped to over $2.9 billion in the last financial year.

These losses soared even after the company’s total revenue exploded higher from $1.12 billion to $7.8 billion in the same period. This happened as it boosted its manufacturing output in this period.

Nio stock price is surging after the company received more funding from Hefei Jianheng, Anhui, and CS Capital, which will invest 3.3 billion yuan. Nio Inc., on the other hand, will invest 10 billion in newly issues shares. 

As a result, Nio Inc.’s ownership of the company will reduce its stake to 88.3% from the current 92.1%.

This new fundraising came a year after the company received $2.2 billion funding from Abu Dhabi-backed CYVN Holdings. 

Therefore, with this new funding confirmed, analysts believe that Nio has enough liquidity to fund its operations for a few years. 

Nio’s recent earnings download

The most recent financial results showed that the company’s business was doing well even as the broader EV industry slowed.

Nio delivered 57,373 vehicles in the last quarter, a big increase from the 23,520 it delivered in the same period in 2023. 

As a result, its quarterly revenues jumped to RMB 17.4 billion or $2.4 billion while its gross profits soared to $234 million. 

As it has done since inception, Nio announced a big loss of $644 million, an improvement from what it lost in the same period last year. 

Nio ended the quarter with $5.7 billion in cash and equivalents. As such, with the fresh $1.3 billion funding, the company will have over $7 billion in cash. 

Potential catalysts for Nio

Nio stock has several catalysts that could push its stock higher in the coming years. First, the company’s stock has become relatively undervalued, with its price-to-sales ratio being 1.37 and its forward EV to sales being 1.39. 

Rivian, another unprofitable EV company, trades at 2.45 and 2.09 multiples, while Lucid Group’s figures are 12.35 and 10. These numbers mean that Nio’s valuation is relatively more affordable than other EV companies.

Second, the company may benefit from the recently announced stimulus measures by the Chinese government. As part of its stimulus, the government will pump over $150 billion to the economy in the coming months, which may incentivize more vehicle purchases.

Third, while the global EV industry is slowing, there are signs that China’s EV companies are seeing more demand, as I wrote recently on Li Auto. Most of these companies have reported double-digit sales growth in the past few quarters.

Nio’s growth will likely see robust demand because of its Onvo brand, whose first vehicle, L60, has seen robust pre-orders. The car is built on NVIDIA’s DRIVE Orin semiconductor.

Additionally, Nio and other Chinese EV companies will likely start winning market share in other countries, especially in the Middle East and Europe.

Finally, there are signs that risk-on investors are getting comfortable investing in Chinese companies.

Nio stock price analysis

NIO chart by TradingView

Nio’s comeback happened after the stock formed a double-bottom at $3.65. In most periods, a double-bottom is one of the most bullish patterns in the market. 

The stock has now moved above the key neckline at $6. It has also moved to the 23.6% Fibonacci Retracement point.

Nio has jumped above the 50-day and 200-day Exponential Moving Averages (EMA), which are about to form a golden cross. 

Oscillators like the Relative Strength Index (RSI) and the MACD have continued pointing upward.

Also, the stock has moved above the Ichimoku cloud indicator. Therefore, the path of the least resistance for the Nio share price is upward, with the next point to watch being the 50% Fibonacci Retracement point at $10, which is about 51% from the current level. 

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