Has the Nio stock price bottomed? June 6th will be key

Nio (NYSE: NIO) stock price has staged a strong recovery in the past few weeks as some investors start buying the dip. It has soared to $5.5, up by almost 50% from its lowest point this year. This rebound is in sync with other EV companies like XPeng, Tesla, and Lucid Group.

Nio, like other electric vehicle companies, faces significant challenges in the coming months. Competition in the industry is gaining stiff with companies from Europe, North America, and Asia gaining market share. BYD just released a new hybrid car with a 2000km range.

All this is happening at a time when demand for electric vehicles is slowing in most countries. A recent report showed that China’s EV industry will grow by 25% this year, its second straight year of slowdown. To be fair: this growth is still strong but the trajectory is worrying.

The biggest issue, in my view, is that the industry is getting oversupplied, with most companies predicting double-digit production growth. This is happening at a time when many Chinese dealers are complaining of huge inventories. 

Nio, itself, is boosting its production and the release of new models. It sold over 30k vehicles in the first quarter and has continued to ramp up production. Its most recent report showed that it delivered 15,620 vehicles in April, a 134.6% annual increase.

Nio, like other Chinese EV companies, is looking at abroad to boost its sales. The challenge is that the American market has become toxic while Europe is considering American-like tariffs. 

Therefore, I believe that the company will look to other places like South America and Asia. It is also betting on its battery swapping technology by forming partnerships with the likes of Geely and Lotus Technology.

It is too early to predict whether the recent stock surge is a sign that Nio has bottomed. I suspect that the company’s financial results scheduled for June 6th will be crucial. 

According to SeekingAlpha, analysts expect that its revenue will be $1.44 billion, a big drop from the $2.3 billion it made in the previous quarter. That drop will be because of its lower vehicle prices and a sharp drop in deliveries from 50,045 to 30,100 in Q1.

The other important figure to watch in this report will be its margins. The most recent report showed that its gross margin was 7.5%, an increase from the 3.9% it made in Q4’22. An increase in margin, partly because of its layoffs, could help to boost the stock. 

Nio will likely be asked to talk about its forward production outlook since it slashed its Q1 estimate. Analysts expect that Nio will produce about 200k vehicles this year, a big increase from the 160k it delivered in 2023.

The daily chart shows that the Nio stock price bottomed at $3.67 in April and has now soared above $5. It is oscillating at the 50-day and 100-day Exponential Moving Averages (EMA). It has now moved between the descending channel shown in black, signaling indecision among bulls and bears.

Therefore, at this point, I believe that it is a bit difficult to predict the next price action of the stock because of its upcoming earnings. If a bullish breakout happens, the next point to watch will be the upper side of the descending channel at $6.50. On the other hand, a bearish breakout will see it crash to the key support at $3.67.

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