NIO shares have been hammered this year. Should you buy the dip?
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Nio (NYSE:NIO) has seen its stock slide 53% since January, despite having five EV models on the market and a new Hong Kong listing to help stoke investment. Should investors buy the dip?
Founded in 2014, NIO has focused on manufacturing premium EVs for the Chinese market. The company currently offers five EV models and plans to begin delivery of its new premium smart electric sedan, the ET7, this month.
Based in China, the company held its initial public offering on the NYSE in 2018, raising around $1B.
EV stocks have been hammered
Shares of NIO have tumbled 53% since the beginning of January. This is part of a larger slide in broader EV space. Shares of industry player Rivian (RIVN) have plunged 64%, while Lucid (LCID) shares have tumbled 42%, Fisker (FSR) 33% and Tesla (TSLA) 24%.
Other Chinese EV makers suffered severe selling as well. Li (LI) shares have sunk 39% this year, while XPeng (XPEV) has dropped 58%. The sector has been pulled down in part by ongoing concerns that some Chinese companies might be forced to delist from US market due to increased regulatory scrutiny and pressure by the Chinese government.
In comparison, the S&P 500 Index has slid 11% since the beginning of the year.
Nioâs stock also wasnât helped by its recent delivery report. On March 1, NIO reported that February deliveries rose 10% year-over-year to 6,131 vehicles, but were down 36% month-over-month.
Is NIO a Buy?
Wall Street analysts, on average, rate NIO as a Buy. Of the 25 analysts tracked by Seeking Alpha, 12 rated the stock a Strong Buy, 9 a Buy, 4 a Hold and none a sell. SA authors, on average, also rate the stock a Buy.
On the flip side, SAâs Quant Ratings see the stock as a Sell. While NIO earned a B- for growth and a C+ for revisions, it also received a D for profitability, a D- for momentum, and an F for valuation.
However, the landscape might be changing for Chinese stocks. Investors received some good news earlier this week when Beijing said it was supportive of domestic companies listing abroad, thereby allaying fears that companies like NIO might be forced to delist down the road. 
NIO analysts have taken a largely favorable view of the companyâs decision to conduct a secondary listing on the Hong Kong exchange. NIO listed the shares through a process called âway of introduction,â whereby shares are offered by existing shareholders and involve no additional financing or the issuing of new shares. The shares began trading on March 10 and are fully fungible with ADSs listed on the NYSE.
âWe expect the Hong Kong listing to provide NIO with an extra financing channel that could be considered in terms of hedging geopolitical risks,â wrote BofA Securities analysts in a note dated Feb. 28. âWe maintain our neutral rating as NIOâs model launch pipeline seems to be well expected by the market.â
Bernstein analysts also viewed the listing as a positive development.
âWe see NIOâs listing in HK as a relief to the delisting risk concerning ADRs on American Exchanges,â wrote the analysts, who have a Market Perform rating on the stock with a price target of $40. âThe downside of a secondary listing is that the company is restricted from raising fresh capital or issuing new shares in the next six months.â
However, Bernstein analysts also expressed concern about NIO facing increased competition in the EV market.
âWe are impressed by NIOâs user-centric offerings and battery swapping technology, but we have reservations regarding the potential sales volume it can generate with competition intensifying in the premium segment,â wrote the analysts. âWe are also worried that NIO will not be able to maintain its differentiation on customer experience as it moves down the price ladder.â
For more insight into NIO's prospects, read an in-depth report from SA contributor Gary Bourgeault.