After exploding from about $22 to $64.60, the NIO stock price is coming under pressure. When this article was submitted, NIO was trading at $36.13 and falling. All after NIO temporarily halted production activity thanks to a global shortage of semiconductors.
“The overall supply constraint of semiconductors has impacted the Company’s production volume in March 2021. The Company expects to deliver approximately 19,500 vehicles in the first quarter of 2021, adjusted from previously released outlook of 20,000 to 20,500 vehicles,” says the company.
In addition, “The chip shortage is expected to wipe out $61 billion worth of sales for automakers as production is stalled for want of the complex pieces of silicon. And the fallout now threatens to hit the much larger electronics industry,” added Livemint.
However, don’t write the NIO stock off entirely.
Even with this short term hiccup, the company is still fundamentally strong.
For December and 2020 full-year delivery results. NIO delivered 7,007 vehicles in December, increasing by 32.4% month-over-month, setting a new record for five consecutive months, and by 121% year-over-year. For the full year, NIO delivered 43,728 vehicles in 2020, representing a year-on-year increase of 112.6%.
Even better, Nomura analyst Martin Heung initiated coverage on the NIO stock with a buy rating and a price target of $80.30. Heung also called Nio, the “epitome of a Chinese luxury brand,” and the “heir apparent in China’s electric vehicle world,” as quoted by Business Insider.
Better, the electric vehicle boom is still strong.
In the U.S., there’s a broader push for more electric vehicles.
For example, in California, Gov. Newsom signed an executive order that will ban the sale of gas-powered passenger cars in the state starting in 2035. That means only EVs will be available for purchase in the next 15 years.
In addition, Biden recently rejoined the Paris Accord, which is bullish for green stocks. He mentioned a $2 trillion clean energy plan, with hopes for net zero emissions by 2050. Plus, he just said the entire federal fleet of vehicles will be replaced with electric vehicles.
“The federal government also owns an enormous fleet of vehicles, which we’re going to replace with clean electric vehicles made right here in America, by American workers,” said Biden, as quoted by Benzinga, which added, “The U.S. fleet is made up of 645,000 vehicles which include 245,000 civilian vehicles, 173,000 military vehicles, and 225,000 post office vehicles.”
At the time of this writing, Ian Cooper did not hold a position in the NIO stock.