Why is NIO Stocktwits Trending?

Why is NIO Stocktwits trending?

Probably because NIO is about to release earnings, and there’s been a lot of articles about NIO (NYSE: NIO) on Stocktwits.

Back in May, I wrote a piece about the Chinese EV company, NIO (NYSE:NIO) that appeared in Stocktwits. And in it, I noted that I wasn’t particularly bullish on the stock as the company wasn’t performing as well as NIO bulls would have you believe.

In that piece, I wrote …

“… This Chinese EV maker lost $835 million between April and June of 2023. And back in 2020, when the company almost ran out of cash, a state-owned investment fund ponied up $1 billion to acquire 24% of the company. That was then followed by the state-owned China Construction Bank that handed the company a $1.6 billion line of credit.

Today NIO stock trades for around $5.50 a share. A far cry from its high of nearly $62 back in 2021.

I don’t believe NIO stock is one to pursue at the moment. Its revenue growth is still coming up short compared to its competitors in the China market. And if it weren’t for a recent $2.2 billion investment from CYVN Holdings, which is controlled by the government of Abu Dhabi, I’m not sure it would have enough cash to get through another year.”

After posting this piece, I was absolutely vilified for my bearish stance. So let’s see where this stock is today.

This is why NIO Stocktwits is trending

Later this week, NIO will announce Q2, 2024 results. And I’m sure this will make “NIO stocktwits” trend even more.

The good news is that we expect to see significant revenue growth. The bad news (or potential bad news) is that we expect to see an increase in operational losses. And I see no evidence of this getting any better for the rest of the year. Which means we may see an adjusted outlook that could also pressure the stock.

The one thing NIO does have going for it is its battery swapping services.

While I’m still not convinced its battery swapping service is of particular value in a place like the U.S., in densely populated regions of China, I get how it could work. It’s not like there are thousands of EV chargers in those massive apartment buildings, and a $25 battery swap once a week is probably worthwhile for those who want to own EVs, but don’t have access to convenient charging. As well, there’s a benefit in terms of battery warranties. Given a battery swapping option, consumers will likely be less concerned about potential issues with battery failures. A warranty wouldn’t even be necessary since the batteries get swapped on a regular basis.

Still, as an investor, I’m concerned about a perfect storm of a softening EV demand and heavy losses at NIO. At least in the near-term.

If the company can continue to grow its battery swapping capacity and revenues, I foresee the company being a legitimate competitor in a couple of years. But until then, it’s likely to be a bumpy ride.

Heading into earnings, I’d be cautious about owning the stock. It just seems that if you want to invest in a Chinese EV company, and you don’t want to take on any significant risk, you’ll be better off with BYD.

BYD for the win!

Last week, BYD posted a 33% increase in Q2 profit. Meanwhile, Chinese EV competitors Xpeng (NYSE: XPEV) and Li Auto (NASDAQ:LI) took it on the chin. This, after Xpeng posted a massive decrease in earnings and Xpeng Q3 revenue coming in below analyst expectations.

BYD also announced record sales for passenger vehicles in August, with battery-electric EV sales growing by almost 12% and hybrid-electric vehicle sales growing by nearly 50%.

As well, BYD continues to expand its operations faster than any of its competitors.

The company recently opened its own showroom in Paramaribo, which is the capital of Suriname, it announced a deal to buy German distributor Hedin Electric in an effort to expand its footprint in Europe, and just two weeks ago, company reps said BYD now plans to open a manufacturing facility in Pakistan, then start selling three of its models via a deal with Mega Motors, which is part of the largest private utility in Pakistan, Hub Power.

While BYD is currently trading at levels that are relatively in-line with its actual value, if it dips below $55.00, I’d buy a few shares. If, that is, you’re ok with owning shares of BYD as a long-term investment – not a quick trade.

Regarding NIO, we’ll have to wait to see how earnings look later this week. But for now, I’m going to wait on the sidelines.