As one of the most liquid stocks in the market (in terms of daily traded volume), I daresay that NIO is considered a favorite amongst both short-sellers as well as long-term investors. Having just recovered from overbought territory, NIO is currently trading at 30% off its highs and currently sits on its GOLDEN CROSS (convergence of its 50 day SMA and 200 day SMA). This can potentially mark a reversal of its bearish trend since February and the start of a new rally.
With expectations building up, will the NIO Power Day 2021 (to be held on 9th July 2021) serve as a catalyst to push up the stock further?
Let’s take a quick look at how NIO has performed to date and what investors can expect to see from NIO’s Power Day this Friday.
I’m a huge NIO bull but despite my personal opinion on NIO, I seek to present the facts behind this company as objectively as I can. Note that NIO is a loss-making company at present and was only able to get to where it is today due to significant aid from the local Chinese government.
Significant roadblocks lie ahead for this company as one of their USPs may end up being their greatest deterrent while pursuing international expansion.
Authors Insight
Electric Vehicle (EV) Stocks – TLDR
When it comes to the world of Electronic Vehicle (EV) companies, there is indeed a lot of speculation as much of these stocks are traded based on the companies’ future potential.
This is simply because most of these companies are not turning a profit at present. Therefore, when it comes to the fundamental analysis of such companies, most ratios don’t seem to work as well. Analysts rely on vehicle production and deliveries as a key indicator of the company’s performance instead.
Investors usually anticipate higher quarter-on-quarter deliveries, hence it is no surprise that we tend to see a possible build-up prior to an upcoming delivery report release.
NIO Deliveries/Sales in China : 2018 to 2021
This is a handy chart that shows the delivery numbers of NIO on a month-to-month basis. It is evident that from 2018-2020, the deliveries by NIO have been steadily increasing.
However, we can see that delivery numbers have actually been falling this second quarter of 2021 (in red) no doubt due to chip/supply chain shortages etc. This has resulted in NIO’s stock price being severely oversold from March to May 2021.
Delivery numbers are indeed a key metric when it comes to valuing loss-making EV startups such as NIO.
This is because increased quarter-on-quarter vehicle deliveries indicate that the company is getting closer to turning a profit. In addition, it also indicates that vehicle productivity within the company is increasing and that there is sufficient demand for the company’s products.
What can investors expect during Nio Power Day 2021?
If you’re looking for a short-term trading opportunity, I don’t think that the NIO Power Day Event is large enough to cause the stock to “pop” overnight. Instead, I see it as an opportunity to help keep NIO on the right side of the road. (No pun intended)
There isn’t an agenda available at the point of writing, but based on bits and pieces of information I found, investors can look forward to the following:
- NIO Power – Charging with mobile devices & other charging innovations.
- Power Home – Dedicated Home Charging Solution
- Power Express – 24hour on-demand charging facility accessible to all NIO customers.
- Battery as a service (BaaS) – More information about 2nd generation battery swap station. Faster replacement in under 3 minutes.
- Europe Expansion – Entering of the Norwegian Market [*I’m looking forward to this.]
Try not to think of this event as an opportunity to flip a quick trade. Instead, ask if you genuinely like the future plans and strategies which NIO would be revealing in this event.
While there may not be any revolutionary technology being revealed just yet (flying cars, 1min battery charge etc.), I do believe that the information presented during the event may help to give investors a clearer idea of how NIO intends to grow in the near future.
What the charts say about NIO – 8th July 2021
At present, we are trading at about 30% off NIO’s all-time high and 15% off the recent overbought levels.
This $45-$46 range can be crucial for the stock in the short term as it is currently the previous resistance (back in March) that has now become support. (Indicated in purple)
With the golden cross, it is widely accepted as the point where the 50-day moving average crosses over the 200-day moving average. Many traders and trading algorithms use this as a signal for executing long positions and I think that we could be seeing this happen in the next month.
For the past month, both the 50-day moving average and the 200-day moving average have been sloping upwards in a parallel manner possibly indicating indecision in the market as to what investors want for this stock in the longer term.
Traders and investors alike should pay close attention to this point as should the 50-day moving average fail to break past the 200-day moving average, this could signal the start of a bear rally. Furthermore, with a possible head and shoulder pattern forming on the weekly chart, the trend here is indeed unclear.
Battery as a Service (BaaS) : A double edged sword
There are many reasons why NIO has grown exponentially in the past year.
There are far too many catalysts to list, but one worthy to note is their battery swapping technology.
In summary, the battery swap technology refers to how NIO owners can swap the batteries of their cars at any NIO battery swap station, thus removing the need (or inconvenience) to charge their cars. This is truly remarkable and NIO has indeed succeeded where Tesla has failed.
While the mechanics behind their battery swap technology can run deep (pricing model etc.) what investors should think about is how this could also become the single largest deterrent of growth for the company moving forward.
Classic Chicken & Egg Scenario
Think about it, if you’re buying a NIO car, you are probably doing so because you like the idea of the battery swap.
What this means is that NIO needs to be committed to building an extensive network of battery swap stations in any country that they choose to expand in, so as to maintain an edge against their competitors. It is an extremely tricky situation.
Which comes first? The commitment to set up an extensive battery swapping network or a customer base large enough to sustain the network?
I would like to leave readers with some food for thought as NIO does have legitimate challenges moving forward.
Let’s observe how NIO’s Power Day goes, if it affects the share price, and how the technicals continue to present themselves in the months ahead.
I am vested in NIO at the time of writing.
