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Down 66% From Its High, Nio Stock Is Too Cheap to Ignore

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It’s been a long, bumpy road for investors of Chinese electric vehicle (EV) maker Nio (NYSE:NIO) over the past half-year. It seems like every time NIO stock pops, the sellers come rushing in to push the price back down.

A Nio (NIO) sign and logo on a tan concrete building.

Source: Sundry Photography / Shutterstock.com

This is undoubtedly frustrating for EV market enthusiasts who believed that Nio would be industry’s breakout star. Now it’s a question of whether to stay in the trade or abandon ship.

As we’ll see, the company’s delivery data indicates that a long position isn’t irrational at all. There does appear to be a mismatch between the price action in NIO stock and the company’s performance as an automaker.

Interestingly though, Nio might not be just an automaker. Reports coming out of China point to a possible new direction for the company along with another potential source of income.

A Closer Look at NIO Stock

The first thing to know is that NIO stock is what you might call high-beta. It’s a fast mover and prone to bouts of volatility, as it has a five-year monthly beta of 2.45.

This by itself isn’t necessarily a reason to avoid the stock altogether. You can certainly invest in high-beta stocks, though it’s usually best to maintain small position sizes.

From a technical perspective, NIO stock has a $55 resistance level, as demonstrated in February and June of 2021. This would be a good place to take profits, if and when the stock gets there.

Value seekers should consider adding Nio shares as they have declined since June of last year all the way down to $20 and change. Look for support at $15, which would be a hard-to-resist buy price.

The Drawdown Is Too Much

For NIO stock to pull back from around $55 to $20 seems excessive, to be honest. A glance at the company’s recently issued delivery numbers should help to explain why the stock is a bargain.

According to Nio’s January 2022 update, the company delivered 9,652 vehicles that month. Compared to some other automakers, that figure might not sound too impressive.

Consider though that it represents an increase of 33.6% on a year-over-year basis. Clearly, the global shortage of technology components hasn’t stopped Nio from delivering vehicles to the public.

With that, Nio’s cumulative deliveries of its ES8, ES6 and EC6 vehicle models reached 176,722. This company is growing by leaps and bounds, and really deserves more respect from the investing community.

Introducing a New Business

Now here’s something you probably didn’t expect at all. This news item, coming from DigiTimes Asia, is truly out of left field.

Citing media reports from China, DigiTimes Asia stated that Nio “plans to make its own phones designed specifically to interact with its cars.” Moreover, Nio’s newly launched cellphone business is already in its “initial research phase.”

Some folks will be skeptical at the idea of Nio making a foray into the cell-phone manufacturing business. However, apparently Nio’s mobile division “has been very active recently and is recruiting more employees,” so apparently the company is quite serious about this.

DigiTimes Asia added a slightly pessimistic slant to its report, observing that “in the past, several China-based tech companies have attempted to expand their business to other industries but failed.”

That’s a fair point, but investors should give Nio’s new business venture a chance to succeed before dismissing it out of hand.

The Bottom Line on NIO Stock

Nio’s delivery numbers should persuade some skeptics that the company is flourishing despite the shortage of tech components.

Meanwhile, an intriguing venture into cell phones could provide an additional source of revenue for Nio.

Besides, it’s possible that the NIO stock price is simply “oversold,” as the technical traders like to call it. That’s a fancy way of saying that the stock is too cheap to ignore, and probably worth buying in small quantities.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content -and crossed the occasional line -on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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