Nio stock price remained in a tight range this month as market participants wait for its financial results and the hype of its recently launched vehicle faded. It was trading at $4.9 on Tuesday, up by 60% from the lowest level this month. This article explores why the NIO share price could pop soon.
Nio stock price technical analysis
The daily chart shows that the Nio share price has done well in the past few months, boosted by its latest L90 vehicle. It soared from a low of $3 in April to the current $4.90.
A closer look shows that the stock is about to form the highly bullish golden cross pattern. This pattern happens when the 50-day and 200-day moving averages are about to cross each other and is a common continuation sign.
Nio stock price has also formed a bullish pennant pattern, which is made up of a flagpole and a symmetrical triangle. The pattern often leads to a strong bullish breakout over time.
The price target is normally estimated by measuring the height of the flagpole and then the same distance from the potential breakout point. In this case, the pattern’s height is about 41%. Measuring the same distance from the breakout point gives it a target of $6.90, which is much higher than the current level.
A drop below the key support at $4.45 will invalidate the bullish forecast and point to more downside, potentially to $4.
Nio’s business is doing well
The bullish case is based on the fact that its business is doing well. A report released this month showed that the company’s July sales jumped to 21,017, bringing the year-to-date figure to 135,167, up by 25.2% from the same period last year.
Most of the deliveries were of its NIO brand, while the rest were from ONVO and Firefly. Another report showed that the company’s sales in the second quarter rose by 25.6% to 72,056.
These numbers indicate that the company’s business was thriving, despite substantial competition in the country. This competition is coming from over 100 brands, including popular names like BYD and Li Auto.
Wall Street analysts expect the upcoming results to show that the revenue rose by 13% in the second quarter to CNY 19.74 billion. They also expect its third-quarter result to be a 32% jump to CNY 24.65 billion, while its annual revenue is expected to be CNY 90.45 billion.
Nio stock has a few crucial risks. The biggest one is that it has struggled to achieve profitability, with analysts expecting its annual loss to be CNY 8 per share. The estimate is that Nio will become a profitable company at least by 2028.
By that time, the company may continue to dilute its shareholders through expensive capital raises. It raised billions earlier this year, pushing its outstanding shares to 1.94 billion, up from 1.52 billion in 2023.
The other risk is that competition and price wars in China will have a major impact on Nio and its margins. Some EV companies like BYD and Li have all announced price cuts recently.
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