Nio stock price forecast: brace for impact on Nov. 20

Nio stock price has suffered a harsh reversal as Chinese companies reacted to recent election of Donald Trump to be the next president of the United States. Nio shares have plunged to $4.50, the lowest level since September this year. It has dropped by over 41% from its highest level in October.

Nio stock crashes ahead of earnings

Nio shares will be in the spotlight this week as the Chinese EV company publishes its quarterly financial results. 

These numbers will provide more color about its business after the launch of ONVO, its newest brand that has received thousands of orders. 

The most recent update showed that Nio delivered 21,181 vehicles in September and 61,855 in the third quarter. The monthly deliveries were up by 35% YoY, while the quarterly figures were 11% higher than what it sold in the same period last year.

These numbers meant that the company was still seeing strong demand for its vehicles. It is also stronger growth than other popular EV brands, including Tesla, whose revenue rose by 7.8% in the same period. 

Nio’s second-quarter results showed that its vehicle sales rose to RMB 15.6 billion, while its gross margin rose to 9.7%. The margin growth is a sign that the company’s business is doing well as pricing stabilizes. 

Analysts expect that Nio’s revenue will come in at $2.67 billion, up from $2.65 billion in the same period last year. 

Most importantly, Nio is reducing its losses, as its net loss moved from RMB 5.18 billion to RMB 5.04 billion. 

Nio has also made more progress in the past few months. For example, the company received a RMB 3.3 billion investment from Hefei Jianheng New Energy. This fundraising came a few months after the company received $2.2 billion from  CYVN, a top Abu Dhabi investment firm. CYVN now owns a 20% stake in the company.

These funds have helped the company to have a strong balance sheet at a time when it is investing in its battery infrastructure and manufacturing. The company expects that its cash burn will continue for a while and that it will become profitable soon. 

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

Nio is moderately undervalued

Analysts believe that Nio is a fairly undervalued company, as its price-to-sales ratio has continued falling. It moved to 0.9662, its lowest level since September 5. It has dropped below the year-to-date high of 2.05. 

In contrast, Li Auto has a P/S ratio of 1.11, while XPeng has a multiple of 2.33. Tesla, which has regained its $1 trillion valuation, has a multiple of 10.5. 

Therefore, these numbers mean that the company was trading at a bargain price, which could make it an attractive investment. This explains why analysts have a positive Nio share price forecast. The average estimate is that the stock will rise to $48.3, much higher than the current $4.8

There are reasons for this view. For one, there is a risk of the slowing demand and increased competition in China. Also, its international expansion process may struggle as concerns about tariffs rise. 

Nio stock price analysis

NIO chart by TradingView

The daily chart shows that the Nio share price has been on a steep sell-off in the past few weeks. It has dropped from $7.71 in October to $4.50 today. Along the way, it moved below the important support at $6.06, its highest level in May this year. 

Nio has also dropped below the 50-day and 200-day Exponential Moving Averages (EMA). Also, the Relative Strength Index (RSI) and the MACD indicators have all pointed downwards. 

Therefore, the stock may continue falling as sellers target the next key support level at $3.67, its lowest level in August. Such a price action would imply a 19% drop from the current level.  The alternative scenario is where Nio bounces back and retests the key resistance level at $6. 

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