Some financial traders may have great expectations for China-based electric vehicle manufacturer Nio (NYSE:NIO) in 2023. Yet, it’s wise to be cautious with NIO stock.
The automaker may be overly optimistic, and building a network of battery swapping stations might or might not be a successful venture for Nio.
Last year, Nio had to deal with on-and-off Covid-19 lockdowns in China and fierce competition in the EV industry. The lockdowns might not be a factor in 2023, but don’t count on Nio’s rivals backing down.
Don’t get the wrong idea – Nio’s isn’t going bankrupt or shutting down, but investors should maintain realistic expectations for the company.
Investors Should Be Concerned About ‘Very Confident’ Projection
NIO stock, which once traded at $62, is currently worth only $10 and change. Clearly, Nio’s shareholders are hoping for a positive catalyst. Did Chief Financial Officer Steven Feng just give them one? Or, did he only set them up for disappointment?
Recently, Feng declared Nio is “very confident” that the automaker will sell 250,000 vehicles this year. After Feng made that statement, shares of Nio in Hong Kong surged as much as 8.6%.
It’s not necessarily a good thing when a stock jumps after a grand prediction. Afterwards, the company has to deliver on its promise in order to justify the share-price spike.
Let’s put this in context. Nio delivered a grand total of 122,486 cars in 2022, missing the company’s own target. Yet, somehow they expect investors to believe that Nio will more than double its sales this year.
It’s a setup for possible failure, which could quickly bring NIO stock back down.
Battery Swapping Station Venture Might Not Help NIO Stock
Nio’s management would probably prefer that investors forget about this, but the company recently closed its insurance brokerage subsidiary company because of regulatory problems.
Also, the company’s attempt at marketing a smartphone called the NIO Phone looks like a non-starter.
Most likely, it would be ideal for Nio to just stick to manufacturing vehicles. However, the company is evidently still trying to extend itself into non-core areas. In Nio’s latest venture, the company seeks to gain a foothold in the battery swapping station industry.
Once again, Nio is setting a high bar for itself and this could lead to another failure. Reportedly, Nio hopes to establish 2,300 battery swapping stations by the end of 2023.
Remember, Nio is doing this during a time when the automaker isn’t in great financial shape.
Nio incurred a net earnings loss of $838.9 million (51 cents per share) during 2022’s fourth quarter. That loss was nearly twice as much as Wall Street had expected (around 26 cents per share) and was a 169.9% deeper net loss than the one reported in the year-earlier quarter.
What You Can Do Now
Sometimes, confidence can help a business; other times, it can be detrimental. Nio’s shareholders should focus on results more than high hopes. After all, Nio still has to show that its foray into the battery swapping station market will be successful.
Nio’s story is still unfolding, and the company’s management might someday decide to focus solely on manufacturing EVs.
Plus, the company ought to concentrate on achieving a profitable profile, not overextending itself. Therefore, it would be wise for investors to stay cautious with NIO stock.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.