Profit from the big move in too risky Nio stock

Shares of Nio (NYSE: NIO) held up simply fantastic amid a large market sell-off in September. Nio’s share price is now up over 640% for six months. Even if you’re a longtime Nio Bull, now is almost as good a time as any to start taking money out of the office.
Supply: Various images / Shutterstock.com

Nio has always been a high risk, high return stock. And there is no doubt that the danger from the stock is a significant decrease from six months in the past. However, the short-term rise in the stock is likely further limited now that its market cap has skyrocketed from about $ 3 billion to $ 26 billion in just a few months.
An electric car market bubble has raised expectations for Nio in the stratosphere. With the stock buying and selling at practically $ 18, Nio may want a number of extra years for his company to catch up as much as its valuation.
NIO share titles
There is no question that Nio’s development metrics have been spectacular. The company reported a 104.1% increase in auto deliveries during the month of August. However, as at all times with Nio, there is a need to keep these numbers in perspective. This 104% growth, however, represents only a tiny 3,965 automobiles. Even after a 33% drop due to the pandemic, Ford (NYSE: F) reported 433,869 deliveries in the second quarter. In other words, Nio delivered less than 1% of the full lineup of vehicles Ford delivered. But Nio’s market cap roughly matches Ford’s.

Bank of America analyst Ming Hsun Lee is a big bull of Nio. Lee has a “buy” rating and a target price of $ 23 for Nio.
“Unhindered access to low cost capital is one of the main advantages of NIO; it thus has sufficient capital to invest in tailor-made autonomous driving solutions and charging infrastructure, ”says Lee.
But even Lee only forecasts 101,000 auto deliveries for Nio in 2022. In two years, Nio will still deliver less than 25% of the variety of automobiles in a year that Ford delivered in a single quarter. In the midst of a pandemic.

15-year outlook
I perceive the excellence between Nio and Ford, so Nio buyers should not send me outraged emails. Nio is a development stock. Not some curious type of development company like Tesla (NASDAQ: TSLA) that isn’t really on the rise. Nio is a high growth company within the largest growing market economy system on the planet. I am optimistic about the basic outlook for the company. However, as I wrote about Tesla recently, perhaps the biggest downside to buyers of Nio isn’t that the stock is selling.
From 2000 to 2015, Microsoft (NASDAQ: MSFT) more than quadrupled its revenues. However, due to the dot-com bubble that drastically inflated Microsoft’s stock price in 2000, Microsoft’s stock actually fell 20% in that 15-year gap.
It is argued that Nio’s share price has been much more inflated than Tesla’s since the 2020 EV bubble. Tesla’s future earnings are a number of inflated 142, but no less than that of Tesla’s from the 2020 EV bubble. ‘he doesn’t have one. Nio isn’t even worth it. Tesla’s price-to-sales ratio is absurdly excessive at 15.6. Nio is 17.6.
Even Lee is forecasting earnings per share of $ 1.86 in 2022. Tesla is 17 and still not worth it without promoting regulatory credit. Nio buyers hope the company is next Tesla plus hope it will do a better job than Tesla in achieving profitability. If not, Nio could still be hemorrhaging by the time 2030 rolls around.
Tips for playing it
When stocks like Nio get caught in market bubbles, they trade more like penny stocks. The share price is no longer tied to the company’s business. It’s linked to the story that merchants are obsessed with. Meanwhile, this story is that auto companies like Ford are dying dinosaurs and Nio is the long haul. I admit that it may be a great story. However, the company itself continues to be on the main webpage for this story, with its assessment already in depth by a number of chapters.
Anytime a stock is up more than 600% in six months, buyers should at the very least be making a profit. Nio will not be worth it, he is years behind Tesla and he still wants to boost billions and billions of {dollars} to finance his development. In the meantime, opponents are expected to launch 20 new EV models by early 2021, according to Wolf Ventures.
There is nothing wrong with staying Nio for a long time even after his massive run. However, buyers want to understand that the stock continues to be a high risk speculative bet. I think Nio has the best publicity for 2 long term development traits that I love: China and electric automobiles. However, the action seemed to be a significantly better bet at three dollars than at 18 dollars.
As of the publication date, Wayne Duggan does not have (instantly or directly) positions in any of the stocks mentioned in this article.
Wayne Duggan has been a US contributor to Information & World Report Investing since 2016 and is an author working at Fintech Zoom, where he has written over 7,000 articles. Mr. Duggan is the creator of the e-book “Beating Wall Street With Common Sense”, which focuses on the psychology of investing and sensible methods to outperform the stock market.