The electric vehicle industry has experienced a boom over the last few years in China. During the boom, Chinese electric vehicles manufacturer Nio Inc (NYSE: NIO) made hay while the sun shined. However, things have not been the same for the penny stock in 2019. Deliveries declined considerably in the first quarter and the stock plunged as well.
Last week, the company announced its second-quarter results. NIO managed to deliver 3,533 vehicles during the period. Although the delivery figure reflected a steep 21% all-in deliveries from the previous quarter, it beat analysts’ estimates. That could be the reason for some optimism among investors.
Read More: 2 Penny Stocks Attempting To Make A Recovery: FuelCell Energy (FCEL), Nio (NIO)
NIO Penny Stock Reverses
[sociallocker id=”2174″]The delivery figure stoked optimism and the stock rose by as much as 15%. Moreover, the penny stock has made a solid bounce from its 52-week low of $2.35 recovering 40% since the beginning of July. However, you must go deeper to see whether it’s really a penny stock to buy or not. There are plenty of reasons why NIO stock has been under pressure this year.
China’s slowdown in demand, coupled with reduced government subsidies has hit the company hard. In addition, the exits of key executives and Tesla’s decision to set up a plant in Shanghai have been cited as factors behind the fall.
Analysts’ Projections
However, analysts believe that it is not all doom and gloom for the tech penny stock. Although NIO stock has plummeted as much as 41% from its listing price in September 2018, there was a spike in demand in June. This was due to the launch of its new ES6 model and could bode well for NIO.
Investors will watch closely whether the demand for the ES6 model can be sustained in the foreseeable future. If that’s possible, then it could prove to be a major boost for NIO stock. That being said, Tesla’s factory in Shanghai presents a significant threat. It remains to be seen how quickly the American company can start rolling out electric vehicles in China.
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