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Like top investors, I’m a fan of battered stocks, because as long as it’s a smart company, there can be a wonderful price to discover. And I like Nio (NYSE: NIO). But even I will stay away from NIO shares right now, despite the ridiculously low price.
Less than 3 months ago, I said that a depressed inventory value of Nio could be a smart opportunity. At this point on the calendar, Nio was down 36% in the first seven weeks of the year. But analysts were still humming a bullish air, with a 140% rise prospect.
What has happened since then? The bulls hid and the bassists came out strongly.
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Nio’s inventory has fallen 33% since I wrote my last column. It has now fallen by 58% in 2022 and by 64% in the last 12 months. The former favorite of the electric vehicle crowd is trading at its lowest point since August 2020.
Nio’s sales in April fell 49% from the previous month, delivering 5074 units, and down 29% year-over-year.
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The shortage of semiconductor chips and supply chain problems have made Nio’s candles tremble. The company recently halted production on weekends and limited operations during the week, leading to shortages of suppliers.
Then there’s the ongoing tension between Beijing and Washington, leading to threats that Nio and other Chinese inventories may be removed at some point from U. S. inventory exchanges. USA
And you can’t forget the resurgence of covid-19 in China, along with Beijing’s strict covid policies that have led to closures in dozens of Chinese cities. This has been a specific challenge recently, according to Morgan Stanley analyst Tim Hsiao, who said investors will closely monitor reports of Covid-19 spread after the May holiday in China.
I had predicted that Nio would post strong earnings for investors this year, but now I’m not so confident. Of course, it is possible that Nio will manage to avoid bleeding. But it will take time, a long time, for NIO to even think about going back to $50. And as long as Beijing is susceptible to shutting down communities in its competitive strategy to restrict the spread of Covid, Nio’s production will continue to be threatened.
The back line? Buy NIO shares if you plan to hold them for five or 10 years and you will make a profit. But if you’re looking to expand your portfolio over the next few months, a Chinese electric vehicle company is the last position that needs a turnaround.
At the time of publication, Patrick Sanders occupied (or occupied) any position in the values analyzed in this article. The reviews expressed in this article are those of the author, the subject of the publication guidelines of InvestorPlace. com.
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