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NIO Stock Consolidates After The Recent Run Up: Time to Buy?

Chinese electric vehicle manufacturer Nio Inc (NYSE:NIO) may have been in a lot of trouble until a few months ago. At the time it seemed that the company was going to end up with a severe cash crunch but after having secured new investment, those troubles are now a thing of the past. 

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What to Watch

Despite all that, experts are still not sure about the immediate prospects of the company or its stock. That being said, it is also necessary to note that the company has performed admirably on certain metrics that might bring about a certain degree of bullishness at some point. 

Recently, NIO managed to beat Wall Street analysts’ delivery forecasts and it is now becoming increasingly clear that the company could end up becoming one of the major players in China, its domestic market. However, at the same time, investors should also note that the electric vehicle giant Tesla has managed to corner a significant portion of the Chinese market. While the bullish arguments are well and good, it is also necessary to take a look at the bear side of arguments. It can be argued that the current momentum in the stock is possibly due to non-fundamental factors and more a case of ‘fear of missing out’. Additionally, the recent performance from the Tesla stock could have had a knock-on effect as well and induced investors to move into other electric vehicle stocks like NIO. 

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For instance, stocks of related companies like Plug Power and Nikola have also benefitted from the rally in the Tesla stock in recent days. Bears believe that if there is a pullback of sorts in the Tesla stocks or it eases as a factor, then it could also result in a corrector in these electric vehicle stocks like NIO. In addition to that, investors could also decide to take the accrued profits and sell off their shares. While all this may be true, it is also true that betting against electric vehicle stocks may not be the best investment idea and many bears have learned a hard lesson with the Tesla stock over the past months. At this point in time, electric vehicles remain an exciting sector and there is still a lot of investor interest. Hence, there is a possibility that the NIO stock might rise further from its current levels. 

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At this point in time, electric vehicles stocks are possibly in the middle of a bubble and it may be possible for traders to make money through swings in the price. That being said, NIO may not be the strongest stock to back if one is looking to get into the electric vehicle space as an investor. While the stock may go down, it might still be a bit risky to short the stock.

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