Is it the right time for dip buyers to put China-based electric vehicle manufacturer Nio (NYSE:NIO) on their watch list? Probably not, as the near-term outlook for NIO stock is unclear and it only deserves a “D” grade right now.
Granted, Nio has a chance to turn a corner in early March as there’s a significant upcoming event. It’s fine to mark your calendar, but don’t get your hopes up too high. Miracles are uncommon on Wall Street, and positive catalysts are few and far between for Nio.
A Major Event for NIO Stock
The situation isn’t entirely hopeless for Nio, and we’re not assigning an outright “F” grade to NIO stock. Yet, it’s still a tough market environment for China-based EV manufacturers like Nio. InvestorPlace contributor Will Ashworth concisely summed up Fortune‘s findings on this topic:
“Fortune reported in January that Bejing would come down hard on manufacturers undertaking projects to build additional capacity in the country when demand for EVs is simply not there.”
Maybe Nio can turn things around with its “electric executive flagship sedan,” the ET9. However, ET9 deliveries won’t start until 2025, so that’s not a near-term catalyst for Nio.
Investors will probably have to pin their hopes on an upcoming quarterly financial report for Nio. Specifically, Nio will release its fourth-quarter 2023 results on Tuesday, March 5.
There are no guarantees of a positive quarterly report, of course, so it’s risky to buy NIO stock before March 5. For Q4 2023, Wall Street expects Nio to have lost 32 cents per share. Hence, it’s likely that Nio will post another unprofitable quarter, adding to a prolonged series of unprofitable quarters.
Nio Gets a Harsh Downgrade
Making matters worse, Nio just got downgraded by JPMorgan analysts. The commentary is harsh, with JPMorgan analyst Nick Lai envisioning “downside to consensus volume/revenue estimates” and expressing concern that a “lack of new models relative to peers may further weigh on its stock performance.”
Let’s talk about that “lack of new models.” According to a MarketWatch report, Nio “only has one new model, called ‘Alps,’ targeting the mass market this year.” Furthermore, that EV model “may not even hit showrooms until the fourth quarter.”
Meanwhile, Lai anticipates that “competition in the mass market” from Nio’s peers in China’s EV market “may only intensify.” With all of this in mind, the JPMorgan analysts lowered their rating on NIO stock from “neutral” to “underweight.” They also sharply cut their price target on Nio shares from $8.50 to $5.
There’s No Rush to Buy NIO Stock Even If It Looks Cheap
Nio shares might look like they’re on sale, but be careful. Lai pointed out some issues that Nio’s overeager shareholders really need to consider.
Moreover, the outlook is unclear as Nio is probably about to report another income-negative quarter. NIO stock is vulnerable to further downside and a miraculous recovery certainly isn’t guaranteed, so we’re assigning the stock a “D” grade today.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.