NIO Stock Price Falls 7.35%: Why It Happened

By Amit Chowdhry ● November 14, 2020
  • On Friday, the stock price of Nio Inc (NYSE: NIO) closed 7.74% below the previous trading day. Here’s why that happened.

On Friday, the stock price of Nio Inc (NYSE: NIO) opened at more than 6% due to a broader rally in the Chinese electric vehicle market, only to end at 7.74% below the previous close. So what happened?

One of the biggest triggers for the drop was a bearish report released by short-seller Andrew Left at Citron Research. Left said that he is pulling the plug on Nio about two years after their controversial recommendation and he assigned the company a price target of $25.

“Two years ago, NIO was trading at just $7 when Citron recommended buying the stock as the company and its charismatic leader William Li intrigued us. After a rocky road of trading, NIO has found itself in unchartered territory that can never be justified by its current standing in the China EV market or its near-term prospects,” wrote Left in the report. “The recent mania of investors flocking to electric car makers in China shows no deeper understanding of a market that is marked by price cuts.”
And Left cited two main points for why the NIO stock is most vulnerable at these levels, which included the Tesla Model Y pricing in China and the share structure of the company. 

The Tesla Model Y could be priced as low as $41,000 in China, which would have a major impact on sales of the Nio ES6 hatchback. And a drop in EVs in China could also hinder Nio’s profitability. 

Earlier this month, there have been some bullish reports about Nio’s shares. JPMorgan Chase increased its price target on Nio from $40 to $46. And Citigroup increased its price target from $33.20 to $46.40. 

Pulse 2.0’s Take

In my opinion, Nio has seen a 68.15% jump in price over the last month and a 1,191.59% jump in the past 6 months. So I would not be surprised if Nio shares see some sort of pullback, similar to what happened with Zoom and Peloton over the last month. Keep your stock portfolios diverse and do not put too many eggs in one basket. 

Disclosure: I have a small NIO position in my stock portfolio.