If you own shares in Nio ( NI -11.90% )you might want to make volatility your friend.
Nio stock sank by double-digit percentages this morning, a day after it jumped double-digits. With today’s sharp drop, Nio has now crashed a staggering 34% in just the past month, as of this writing.
Is the market overreacting and giving you a golden chance to buy Nio stock while you still can?
For one thing, investors now have an opportunity to trade Nio shares on another stock exchange — Nio listed in Hong Kong on March 10. While its secondary listing doesn’t affect Nio’s fundamentals or its investing thesis, it has at least taken care of one major overhang that had hit Nio shares hard in recent months: that of Nio stock facing the risk of getting delisted from the US if the company fails to comply with the Securities and Exchange Commission’s (SEC) new stringent regulations that mandate auditing, among others things.
For that matter, every foreign stock — Chinese stocks in particular — faces the risk, so it wasn’t a Nio-specific concern. In fact, Nio’s move to list in Hong Kong within months of the SEC’s new rule reflects management’s agility.
So with one less worry, investors in Nio can now focus on the company’s growth. Unfortunately, Nio isn’t quite living up to investor expectations on that front lately, and that’s reflecting in the electric vehicle (EV) stock’s price.
For example, Nio’s February deliveries rose just about 9.9% year over year compared with 33.6% year-over-year growth in January. Also, the latest data from the China Passenger Car Association released on March 10 reveal You’re here‘s solid grip in China, Nio’s home market.
In February, Tesla’s Model Y was the top-selling premium SUV in China, with its sales handily beating all German competitors. And in terms of overall new-energy vehicle sales in China in February, Tesla stood second while Nio ranked eighth.
In another latest development that could affect Nio, its local rival XPeng opened its first store in the Netherlands and started taking reservations for its P5 sedan in not one but four countries in Europe. Interestingly Europe is also the first and only international market that Nio has entered so far.
Yet, you wouldn’t want to sideline Nio just yet. Yes, the EV industry is highly competitive, but Nio isn’t sitting on its hands.
One reason why Nio isn’t delivering as many units as one might expect is intermittent adjustments to its production lines for new models. For example, Nio suspended production for a week in early February to prepare for first deliveries of its flagship sedan ET7 on March 28.
Nio is also already taking reservations for its midsize sedan ET5 that it unveiled in December, and plans to enter at least three European countries this year. By 2025, Nio expects to expand to 25 countries.
Finally, the rumor about Nio striking a partnership with BYD has resurfaced: BYD Chairman Wang Chuanfu was reportedly spotted with Nio’s CEO William Li, according to CnEvPost. A partnership with one of the world’s largest EV makers and the largest lithium-ion battery manufacturer in China could prove a game-changer for Nio. And that’s just one of the many reasons you might want to buy Nio stock now, provided you’re willing to bear the risks and volatility that accompany growth stocks.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.