LI - NIO: The Pain Carries On (Rating Downgrade)

2024-02-24 13:30:00 ET

Summary

• NIO Inc. stock has struggled to scale rapidly, suggesting its 2024 outlook could be at risk of another massive disappointment.
• The lack of a hybrid strategy and a global slowdown in EV growth could lead to a moment of reckoning for unprofitable EV players like NIO.
• I assessed NIO investors have priced in steep pessimism as the company heads toward its fourth quarter earnings release in early March.
• I urge investors to avoid adding on to their pain by trying to catch this falling knife.

Making a consistently profitable call on NIO Inc. (NIO) aka NIO has proved to be highly elusive, as the unprofitable cash-burning electric vehicle ("EV") operator has disappointed again. In December, it attempted to deliver hopes for investors as NIO unveiled additional investments by Abu Dhabi-based CYVN holdings. Accordingly, CYVN Holdings agreed to invest $2.2B in NIO, based on a price of $7.5 per share. It led to a momentary surge in NIO, recovering nearly 40% from its December lows through the $9.6 level. It also allowed my previous bullish thesis to play out, as I upgraded NIO in early December, anticipating NIO was "very close to the floor." However, that surge didn't last, as selling pressure intensified at the end of December, which I assessed as appropriate....

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