Chinese electric vehicle manufacturer NIO Inc. ADR (NIO) is trading higher by nearly 6% in Thursday’s pre-market session after reporting March deliveries of 7,257 vehicles, marking an impressive 373% year-over-year increase. However, the statistic is less spectacular that it looks at first glance because China auto sales were brought to a standstill in the first quarter of 2020 due to COVID-19 lockdowns.
NYSE Listing At Risk
The stock has struggled since January, held down by overbought technical readings after 2020’s 1000% return and a worldwide chip shortage that forced NIO to suspend production for five working days in March. In addition, China companies trading on U.S. exchanges are now subject to the Holding Foreign Companies Accountable Act and have to submit proof they are not “owned or controlled by any foreign government”. That could be tough after 2020’s $1.4 billion bailout from the municipal government of Hefei, the capital of China’s Anhui province.
NIO itemized first quarter production in the release, noting “deliveries consisted of 1,529 ES8s, the Company’s 6-seater and 7-seater flagship premium smart electric SUV, 3,152 ES6s, the Company’s 5-seater high-performance premium smart electric SUV, and 2,576 EC6s, the Company’s 5-seater premium smart electric coupe SUV. NIO delivered 20,060 vehicles in the first quarter of 2021, a new quarterly record representing an increase of 423% year-over-year. As of March 31, 2021, cumulative deliveries of the ES8, ES6 and EC6 reached 95,701 vehicles”.
Wall Street and Technical Outlook
Wall Street consensus has improved despite outsized 2020 share gains, with an ‘Overweight’ rating based upon 11 ‘Buy’, 6 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $38.80 to a Street-high $81 while the stock is set to open Thursday’s session more than $20 below the median $63.64 target. Both the chip shortage and potential for delisting are at least partially responsible for this weak placement.
NIO broke out above the 2018 high at 13.80 in July 2020 and entered a powerful trend advance that posted an all-time high at 66.99 in January 2021. The stock fell more than 50% into early March before finding support at the 200-day moving average. A pullback tested that level successfully earlier this week while the subsequent bounce raises odds for a double bottom reversal and strong recovery wave into the low 50s.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.