About this time in 2021, NIO (NYSE: NIO) stock was around $60.
Today, the Chinese electric vehicle maker is just a fraction over $6 per share. That’s a 90% fall, and £10,000 invested back then would be worth just £1,017 today.
That 2021 price was around the all-time high, and it had rocketed in the second half of 2020. Tesla was flying at the same time, but the two have fared very differently since then.
Why the fall?
I think NIO stock was in bubble territory. Tesla was the hot Nasdaq growth stock, and it seemed everyone wanted a slice. I even remember people on YouTube who knew nothing at all about the stock market telling us they’d gone in big on Tesla.
Tesla was on a price-to-earnings (P/E) ratio of around 200 at the time. And it looked like NIO was the only other game in town. But with no profit yet, there was no P/E.
Tesla went on to hit even higher prices by late 2021. But it’s interesting to see it today below those early 2021 levels.
No profit yet
Forecasts as far away as 2025 don’t show any profit for NIO. Forecasts for Tesla, meanwhile, show rising earnings. They’d put the stock on a P/E of a bit under 40 by 2025.
That still looks maybe a bit high. But it’s a lot better than 200, and it might even turn out to be cheap.
Yet the big question is, could NIO stock be a good buy right now? That seems to depend on how fast the company can lift its revenues.
That in turn must be tied to the Chinese economy, which isn’t doing so well right now. And I’ve been reading fears from economists that it could be worse than we first thought.
Revenue growth
Back in 2021, NIO revenue was more than doubling each year. And it surely wouldn’t take long for that to start lining shareholders’ pockets with fat profits.
But then in 2022, revenue growth slowed to 26%. We don’t have FY23 results yet. But with what looks like a good final quarter, we could see revenue growth getting stronger again.
Forecasts suggest a hefty loss before tax for 2023, but they do have the losses falling sharply by 2025. And it looks to me as if 2026 might just mark the breakeven point.
Time to buy?
Whether NIO turns out to be a buy at today’s price will, I think, depened a lot on what the company can achieve in 2024.
It does have impressive technology, and those who know about these things seem to think its cars are seriously good.
I don’t know the business well enough to buy myself. But I have a feeling that NIO stock could set be for a turnaround. And maybe £10,000 in the stock today could be worth a good bit more than that in another three years.
