NIO stock has been witnessing a heavy selling pressure since early March due to lingering uncertainty. Let’s analyze the key drivers for NIO Inc (NYSE:NIO).
Analysts are Still Bearish
Last year, Chinese electric vehicle manufacturer NIO had its initial public offering with much fanfare, but NIO stock has had a terrible time in 2019 so far. The stock reached its 52-week high back in March, but since then, it has lost as much as 85% to hit a low of $1.50, and analysts believe that investing in NIO is nothing but a foolish choice at this point in time. One of the most striking features of the quagmire that the company is stuck in is the fact that even higher sales figures are currently not enough to turn the stock around.
Due to the way in which NIO has burned through the cash at its disposal, analysts believe that the company is now facing the very real prospect of a cash crunch. In addition to that, the company continues to post operating losses and negative gross margins.
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Put together, this indicates that cash is going out of the coffers very fast. It is the opinion of most experts and analysts that unless the company gets a major cash infusion soon, then it will be difficult for NIO Inc to continue as a business.
Even though NIO stock has crashed by as much as 85% this year so far, analysts believe the stock is still overvalued due to its current cash crunch and the fact that it posts negative gross margins. At this point, the company is also burdened with debts of $1.56 billion, and although it has $2.65 billion in assets, it is likely that the actual value of those assets is lower.
Even if an investor is looking to short the NIO stock, that opportunity is likely gone due to the crash it has already suffered. On the other hand, it is simply not a long-term play due to the wide range of issues that the company is suffering from at the moment.
What do you think?
Featured image: DepositPhotos © Thomaspajot
