Down 66% in this Bear Market, Can Neo Stock Recover in 2023?


what happened

take (NIO 0.30%) The stock has lost 66% since its market peak on January 3, 2022, according to data provided by S&P Global Market Intelligence. The S&P 500 Since then the index has fallen about 18%.

Electric vehicle (EV) stocks may be off to a good start this year, but is it a dead cat bounce? Given the challenges Nio faced in 2022 and is still facing, can the stock recover in 2023?

so what

Rising cases of Covid-19 in China, lockdowns and their impact on the economy have proved to be the biggest hindrances to Neo’s growth in 2022. While the company’s deliveries rose steadily throughout the year, it was not a smooth upward graph thanks to shortages in supply of key components and production suspensions amid the COVID-19 lockdown.

More significantly, Nio’s vehicle and gross margins are under considerable pressure in 2022 due to rising component and battery costs. However, it was a global problem that hit almost every EV maker as prices for key metals like lithium, nickel and cobalt skyrocketed.

Nio proved its resilience as it quickly ramped up production and its deliveries hit a record monthly high of 14,178 units in November. The EV maker started selling three models in 2022, the ET7 sedan, ES7 SUV, and ET5 midsize sedan, with sales increasing.

Unfortunately, with China’s reopening a few weeks ago leading to a new outbreak of coronavirus cases, Neo cut its fourth-quarter delivery outlook in December to between 38,500 and 39,500 vehicles from its previous guidance of 43,000 to 48,000 units. This further sends EV stocks crashing.

Nio, however, beat its fourth quarter delivery estimates and delivered a record quarter with 40,052 deliveries, up 51% year over year. And that’s one reason why Nio stock is up nearly 16% since the start of 2023.

what now

So can Neo stock recover in 2023? I believe it could be, because Neo doesn’t have the demand problem. Despite all the challenges, Nio delivered 122,486 vehicles in 2022, up 34% from 2021. Its ET5 sedan, which Nio began delivering on September 30, 2022, has already made it to the top 10 best-selling premium sedans in China in December. In fact, only two all-electric cars made the top 10, and both belonged to the Nio: the ET5 and ET7.

Nio launched two new models at its Nio Day event in December, has more launches for 2023 and is currently focusing on delivering more cars to meet demand. It plans to expand its footprint in Europe this year.

Of course, the Chinese auto market may still experience pressure for several months due to ongoing supply chain and COVID-19 constraints. Nio, however, is unlikely to stop growing as its strong product lineup and focus on gaining market share make this beaten-down EV stock a must-watch in 2023 and beyond.

Neha Chamaria has no position in any of the mentioned stocks. The Motley Fool Neo has and recommends posts. Motley Fool has a revealing policy.


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