(MENAFN- Baystreet.ca) When Nio Inc. (NYSE:NIO) rallied back to the $4 level, profit-taking sent the stock lower. Its valuations do not make much sense, either. Shares trade at around four times sales, compared to two times for Tesla.
Nio's growth prospects depend entirely on China customers. Is the macroeconomic risk of trade wars and a potential slowdown in consumer spending manageable for Nio?
Nio reported deliveries for its ES6 and ES8 that surpassed market expectations. At 3,553 deliveries for ES6 and ES8, this exceeded the 2,800 – 3,200 guidance by 18%. Naturally, the stock bounced back but speculators quickly locked in profits the next day.
Nio's sedan and SUV are luxury goods that will have no problem competing against Tesla's EVs. Brand loyalty and a preference for a good produced from a China-based could sustain Nio's sales momentum for the rest of 2019.
Placing a small speculation on Nio stock could pay off.
Tesla also reported strong EV production, which suggests the market is still strong. But Nio offers exposure to the Chinese market where Nio will likely benefit from little competition.
Takeaway
Nio cut costs to adjust for tougher market conditions. Lower operating costs will narrow losses while an acceleration in revenue may lead to the company getting to profitability sooner than thought.
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