The electric vehicle industry has been going through a bit of churn over the past few months. Chinese electric vehicle manufacturer Nio Inc. (NIO Stock Report) has also felt the heat in recent days. The first quarter results this year have been disappointing and sales have plunged considerably. This has put a lot of pressure on this penny stock. And in our first introduction to NIO Stock, we said this could be a penny stock soon (see: Nio Inc (NIO) Is Now A Penny Stock).
Since May 29th, the stock has dropped by as much as 25%. Investors dumped it amid rising concerns about the company’s immediate future. In addition to that, there have been other developments as well that has made life difficult for NIO. So is NIO set for new lows or is it time to buy the penny stock?
Bank of America Downgrades NIO Stock
Ming Hsun Lee, who is an analyst at Bank of America Merrill Lynch (BAC Stock Report) downgraded the penny stock to underperform. This was from a previous rating of neutral. Lee also reduced the target price to $3 from $6.20. The report proved to be one of the biggest triggers behind the selloff.
However, on Wednesday the selloff started and continued on the next day. The 54% drop in sales proved to be a difficult statistic to digest for most. The fact that NIO also stated that sales will remain weak over the next few months was another big deterrent. The cutting down of subsidies for electric vehicles has also hurt costs, adversely.
What’s Next For This Penny Stock?
The problems with sales and establishment of Tesla’s (TSLA Stock Report) plant in Shanghai may give investors pause over the short term. But over the long term, there’s no telling if NIO could be alright. The powers that be in Beijing have already stated that they wish to grow electric vehicle sales in the country considerably over the next few years. The problems come as competition continues to increase in the People’s Republic.
China wants 20% of all car sales to comprise of electric vehicles by 2025 and if that is the case, then there is no reason why NIO can’t grab a chunk of that market. It just comes down to how much of a chunk it can grab.