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Nio Is Now Down 58% From Its High. Is It a Buy?

By John Rosevear – Dec 20, 2021 at 2:37PM

Key Points

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For Nio, 2022 should be very different from 2021.

Shares of Nio (NIO 6.41%) set their all-time high back on Jan. 11, when they traded at $66.99 at some point during the day. As I write this at 2 p.m. ET on Monday, the stock is down about 58% from that all-time high. (If you prefer to measure from closing prices, it's down just over 55% from its highest-ever close of $62.84, set on Feb. 9. Either way, not good.)

Clearly it has been a rough year for Nio, which has been hit by COVID-19 shutdowns, supply chain challenges, and a lull in its new-product cycle that allowed competitors to gain ground. 

That lull will end soon. Nio will begin shipping its long-awaited ET7 sedan in March, followed in September by the one-size-down ET5, which was revealed on Saturday. Meanwhile, its order books remain strong, its customer satisfaction is high, and there are signs that it may have put the worst of the supply chain woes in the rearview mirror. 

Is that enough to make it a buy?

A blue Nio ET7, a large electric luxury-sports sedan.

Nio's long new-product lull will end on March 28, when deliveries of the new ET7 sedan will begin. Image source: Nio.

Several Wall Street analysts think so. In a new note on Monday, Morgan Stanley analyst Tim Hsiao reiterated the bank's overweight rating and $66 price target on Nio's shares. Hsiao wrote that while the stock's risk-to-reward ratio seems attractive, the market is expecting a lot from Nio in 2022 -- but it seems well positioned to deliver. 

Hsiao isn't an outlier. Last month, Citi analyst Jeff Chung noted that Nio is expected to launch three new products and revise its three existing vehicles next year, putting it in position to gain back the market share it lost to newer models from rivals like Xpeng, Li Auto, and Tesla. He maintained his bank's buy rating and $87 price target for Nio's shares.

I'm inclined to agree with both. We haven't yet seen the third new model that Chung mentioned (the others are the ET5 and ET7), and my sense is that Nio is keeping some other surprises up its sleeve for now. While investors may need to be patient through the next few months, the new sedans -- and those surprises -- could be just what's needed to bump the stock price back up in 2022. 

Citigroup is an advertising partner of The Ascent, a Motley Fool company. John Rosevear has no position in any of the stocks mentioned. The Motley Fool owns and recommends Nio Inc. and Tesla. The Motley Fool has a disclosure policy.

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