Nio (NYSE: NIO) stock price has been in a freefall after peaking at $66.95 in January 2021. Now, the shares are trading at $7.91, meaning it has plunged by more than 88% from its all-time high. The stock has dropped by 17% this year, meaning it has underperformed companies like Xpeng and Li Auto.
Nio growth concerns
Nio share price has plunged despite the company’s revenue growth. Its annual revenue jumped from over $719 million in 2018 to over $7.14 billion in 2022. This makes it one of the best-performing Chinese companies in this period. And analysts expect that the revenue will jump to over $21 billion in 2025.
Despite this revenue growth, Nio has been a cash-burning machine as its annual losses have jumped from $506 million in 2016 to more than $2.11 billion in 2022. Analysts believe that the company will continue bleeding cash until 2025.
Nio, like other companies in the industry, is facing numerous challenges. The most important challenge in the industry is the rising competition in the industry. Data shows that there are now over 90 EV brands in China. A small number of these firms are giant companies that have well-known brands like BMW, Tesla, VW, Li Auto, and Xpeng.
Therefore, there is a likelihood that the market will get crowded in the future. We are already seeing this, especially with the weak deliveries in April when the company delivered 6,658 cars during the month.
The other challenge for Nio and its stock is its international growth. The company has announced that it will expand to some European markets. I believe that the company could struggle to compete in some of these markets, which are dominated by European car brands like Stellantis and VW.
Nio stock price forecast
Nio share price has been in a strong freefall in the past few months. During this slide, the shares have plunged below the 25-week and 50-week exponential moving averages. The Awesome Oscillator has moved below the neutral level.
Further, the shares are being supported at the key support at $7.62, the lowest level this year. Therefore, at this stage, using trend-following principles, there is a likelihood that the stock will continue falling. I can only recommend buying in Nio when it moves above the 50-week moving average at $14. This price coincides with the highest point on December 5.
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