NIO Inc. (NYSE:NIO) has had a difficult 2019 in which it has experienced underwhelming sales as the company continues burning cash. Since the beginning of this year, NIO stock has lost 52%, and since its early March highs, it has dropped 67%.
NIO Stock Continues to Sink
Pressure has been piling recently on the stock following a short rally in July. Things could get worse, putting the company’s very viability at risk in the short-term. NIO seems to be cheap after the stock pulled back to the current price at $3. The Chinese company should be in the same league with US electric carmaker Tesla Motors (NASDAQ:TSLA), but this isn’t proving to be the case.
In August, NIO stock took a beating and dropped 17.4% following a wave of dreadful news. The company is feeling the effects of the trade war, which doesn’t seem to have an end in sight. The devaluation of the Chinese Yuan in August made the company’s profits less valuable to investors. There are still macro concerns in China, leading to the volatility of even big players like JD.com (NASDAQ:JD) and Alibaba (NYSE:BABA).
Bad News in Recent Months Hurting NIO
July was even more disappointing, with the company making only 837 vehicle deliveries. The company co-founder retired following two executives who left the previous month. The company also indicated plans to lay off around 1,200 of its staff.
NIO is supposed to be a growth company but judging from the series of events, it is not. Its stock price is two times its revenue including net debt. This seems cheap, but for an unprofitable company that does not manufacture its vehicles, it is not. NIO is a company in need of saving cash, and it’s not selling enough cars to cover its expenses.
China has over 480 electric vehicle producers, which means NIO faces stiff competition. Therefore, NIO’s main challenge is not the trade war but competition.
The company is yet to report its Q2 earnings two months after the quarter ended. However, that does not mean there is no good news because the company may be working on something before the release.
However, NIO stock has gained about 13% over the past three trading sessions.
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