Exploring Investment Opportunities in Nio shares (NIO)

Exploring Investment Opportunities in Nio's Shares (NIO)

Nio (NIO dropping by 2.23%) is one of numerous electric vehicle (EV) startup companies aiming to establish production facilities to capitalize on the expanding demand for greener automobiles. Established in 2014, the Chinese-based company focuses on the premium smart EV market.

Nio has introduced various electric vehicles into the market, including its flagship SUV, the ES8. The company is also pioneering innovative technologies such as its leading battery-swapping service (Battery-as-a-Service, BaaS) and autonomous driving-as-a-service (ADaaS).

Despite being dominant in China, Nio has global expansion goals in sight. It entered its initial foreign market, Norway, in 2021, with aspirations to be present in 25 countries by 2025. To achieve this, Nio is investing heavily in expanding its production capacity to sell more EVs. Additionally, it's pouring money into lithium reserves and battery manufacturing to slash costs.

Nio's significant growth possibilities have motivated several investors to contemplate investing in its stock. Here's a simple guide on how to acquire shares of the electric automobile stock along with important factors to keep in mind before including it in your portfolio.

How to buy

Purchasing Nio stock

Before buying shares of any stock, including Nio, you must complete a few simple steps:

Open your brokerage app: Access your brokerage account where you manage your investments.
Search for the stock: Type the stock ticker or company name into the search bar to showcase the stock's trading page.
Determine how many shares to buy: Consider your financial objectives and the portion of your portfolio you wish to put towards this stock.
Select order type: Choose between a market order to purchase at the current price or a limit order to specify the maximum price you're willing to pay.
Submit your order: Confirm the details and submit your buy order.
Review your purchase: Examine your portfolio to ensure your order was filled correctly and adjust your investment strategy accordingly.

Stock Ticker

A brief combination of letters representing a company's stock for trading purposes, displayed on financial platforms. ## Should I invest?

Contemplating investing in Nio?

Thorough research is essential before acquiring shares of a company, and could possibly alter your investment perspective s. On the one hand, these are reasons to consider investing in Nio:

You're invested in clean technology companies working towards decarbonization of the economy.
You have faith that Nio will eventually achieve accelerating profits.
You're seeking investments with high growth potential.
You're comfortable with Nio's cash burn and believe it can continue securing funding for operations.
You trust Nio's strategy of securing lithium supplies and constructing battery manufacturing plants to minimize costs and eventually generate profits.
You expect Nio's global expansion plans to drive rapid revenue growth in the coming years.
Dividends aren't a necessity for your investment.On the other hand, these are factors to consider that might deter you from investing in Nio:
You have substantial concerns regarding whether EVs will displace conventional automobiles.
You're worried that Nio might continually dilute existing investors by issuing more shares to cover its operating expenses, potentially further devaluing the stock price.
You're concerned about the increasing competition in the EV market, which may lead to price wars and hinder Nio from generating revenue.
You're in or approaching retirement sums and require investments that produce income.
You're seeking investments with lower risk profiles and reduced volatility compared to Nio.

Profitability

Is Nio profitable?

Exploring a company's profitability is vital to an investor's stock research process. Improving profits often contribute to stock price performance over the longer term.

By late 2024, Nio had yet to reach profitability. The EV company reported a net loss of $721 million in the third quarter, a 11% increase from its loss in the previous year's quarter, and a 0.3% rise from the second quarter. On a non-GAAP basis, Nio reported a loss of $628.8 million.

One of the primary contributors to this growing loss was a slowdown in the company's sales. Nio's revenue decreased by 2.1% to nearly $2.7 billion in the third quarter, primarily due to a 4.1% decrease in vehicle sales. On a positive note, both revenue and sales grew compared to the second quarter (7% and 6.5%, respectively).

Nio continues to expend capital on research and development (R&D) and expanding its operations, leading to a consistent need to secure additional funding from investors to continue operations. In September 2024, the company raised $1.9 billion in cash following an additional investment from its parent company and a group of investors. At the end of September 2024, Nio's cash balance was $6 billion.

If the company fails to turn a profit, it will have to continue raising capital to support its operations. Continuing losses and stock dilution have seriously impacted Nio's stock price.

Shares have plummeted over 90% from their peak, mainly due to a massive increase in issued shares as the company issued additional stock to finance its operations. If the company continues to report losses and swiftly depletes its cash reserves, it might be compelled to issue more shares to investors, further burdening its share price.

Dividends

Does Nio pay out dividends?

As of the end of 2024, Nio had yet to announce a dividend program and shows no signs of paying out dividends in the near future. The EV company is using its cash to fund its operations and expand its business.

ETF options

ETFs investing in Nio

An alternative to directly purchasing Nio shares is to consider a passive investment in the EV company through an ETF that holds its stock. A popular passive investment method is an exchange-traded fund (ETF).

Exchange-Traded Fund (ETF)

An ETF allows investors to purchase multiple stocks or bonds at once. In late 2024, 31 ETFs held a combined 8.7 million shares of Nio, with the SPDR Portfolio Emerging Markets ETF (SPEM -0.8%) being the largest holder, holding 1.6 million shares. However, at 0.08% of the fund's total holdings, the allocation to Nio was minuscule, making other options a better choice for investors looking for passive exposure to Nio.

For example, the Invesco Golden Dragon China ETF (NYSEMKT:PGJ), had a 3.61% allocation to Nio, while the KraneShares Electric Vehicles and Future Mobility Index ETF (KARS -1.41%) had a 2.7% allocation. These ETFs might be more suitable for investors seeking passive exposure to Nio and Chinese or electric vehicle companies.

Additionally, consider other electric vehicle ETFs or lithium ETFs that hold Nio stocks, giving investors passive investment opportunities in Nio and other market-leading EV companies.

Stock splits

Will Nio conduct a stock split?

As of late 2024, there was no announcement of an upcoming stock split from Nio. The company hasn't carried out a stock split since its IPO in 2018 and shows no signs of doing so soon.

The company's large cash burn and subsequent share issuance to fund operations has driven up outstanding shares and diluted existing shareholders, negatively impacting its share price. With continued share issuance and declining share prices, Nio may need to consider a reverse stock split to elevate its trading price instead.

**#### How to Invest in Lucid Group (LCID)

Investors with brokerage accounts can purchase Lucid Group stock or invest in an ETF that includes Lucid, a leading electric vehicle company.****#### How to Invest in Tesla Stock in 2024

Get detailed advice on how to invest in Tesla stock and understand the intricacies of this electric vehicle company.****#### How to Invest in Ford Stock

Get step-by-step guidance on investing in Ford stock and grasp the nuances of this automotive company.****#### How to Invest in ExxonMobil Stock

Get comprehensive guidance on investing in ExxonMobil stock and delve into the intricacies of this energy company.**## The summary for Nio

Nio is still in its infancy. The Chinese electric vehicle start-up is currently investing heavily in research and development and expanding its manufacturing capabilities. The company's potential for exponential growth is immense as it capitalizes on the increasing demand for electric vehicles. If Nio manages to reach profitability, its share price could see significant appreciation in the future.

However, due to the company's ongoing financial losses, it is likely to continue raising capital by issuing more shares, thus diluting the value of existing shares. If Nio fails to achieve profitability, it might continue to be a money-losing investment.

FAQ

Nio Investing Questions

Is Nio stock a solid investment?

Nio possesses significant potential, given its presence as a leading electric vehicle manufacturer in China and its global ambitions. Nio's investments in expanding its product range and operations could lead to significant revenue and profit growth in the future.

However, its ongoing losses may necessitate continuous share issuance to outside investors to fund operations, diluting existing shareholders and limiting the stock's potential for significant price growth. Nio might not be the ideal investment for most investors, with a more suitable fit for those with a high risk tolerance and a focus on high upside opportunities.

Launch your investing app: Access your investment account through the app where you manage your financial holdings.
Find the stock: Input the stock symbol or company name in the search bar to show the stock's trading information.
Set your desired share quantity: Reflect on your investment objectives and determine the portion of your portfolio you wish to dedicate to this specific stock.
Select order type: Opt for a market order to purchase at the current price or a limit order to establish the maximum cost you're ready to spend.
Submit your request: Review the details and submit your buy order.
Examine your buy: Investigate your portfolio to ensure your order was executed as intended and change your investment methodology if necessary.

Is Nio available on Robinhood?

Indeed, you can purchase and sell shares of Nio on Robinhood (NASDAQ: HOOD).

Can Nio stock hit $1,000?

Nio shares traded below $5 in late 2020, signifying a long journey to reach $1,000 per share. At its highest point in early 2021, Nio closed at an all-time high of $62.84 per share. However, the stock declined from that peak due to continued losses and funds raised through share issuances for operational purposes.

To achieve $1,000 per share, Nio needs to reverse its losses and demonstrate rapid profit growth acceleration. It would also likely require share repurchases to counteract the effect of dilution on stock value. Given these factors, it is unlikely that Nio stock values will soon reach $1,000 per share without a substantial reverse stock split.

Matt DiLallo holds no stakes in any of the mentioned stocks. Our Website has no stock holdings in any of the mentioned stocks. Our Website adheres to a disclosure policy.

Nio is also investing heavily in expanding its lithium reserves and battery manufacturing facilities to lower costs and potentially increase profitability.

Investors considering Nio stock may find it appealing due to its focus on clean technology and potential for high growth, but they should also consider factors such as competition in the EV market, concerns about EV adoption, and the company's history of losses and stock dilution.