Investor enthusiasm for Nio (NYSE:NIO) stock has started to renew since May. After falling to as low as $11.70 per share, the China-based electric vehicle (or EV maker) has climbed back to around $19 per share.

While still down big from its all-time high hit in 2021, it remains one of the more popular EV plays out there among investors.

This mainly is the result of its exposure to the fast-growing Chinese EV market, but also because of the potential for it to move beyond its home market and become a global EV maker on par with companies like Tesla (NASDAQ:TSLA).

Before you buy into the bull case that it’ll make a full recovery in the long term, there are many factors that suggest this will not be the case. The best move may be to skip on it and go with more promising names in the space.

NIO Stock and the Questionable Bull Case

Nio trades for a fraction of its past highwater mark, but plenty of investors are confident that it’ll make a big recovery. Those bullish on the stock are confident that a sales re-acceleration is just around the corner.

After reporting underwhelming delivery numbers, mainly as a result of China’s virus-related lockdowns, deliveries are expected to pick up later this year. In addition, the company’s expansion of its production capacity is also expected to come online during this time.

This in theory should provide a boost for its results in its home market, and in turn, lead to a boost for NIO stock.

The company’s global expansion is seen as another catalyst for shares. Already selling its EVs in Norway, as InvestorPlace’s Samuel O’Brient reported on Aug. 20, the company is gearing up for its launch in Germany. If its move into Europe proves successful, a launch in North America could follow.

However, while many may be confident that both these possible catalysts will play out, I see it differently. Not only that, but a short-seller’s raising of red flags also casts doubt on the bull case for this stock.

Possible Red Flags

When it comes to the possibility of a growth re-acceleration for Nio in China, I’m doubtful. Even as the Chinese government rolls out incentives to spur EV purchases, the slowdown currently playing out in the world’s second-largest economy could outweigh this.

Nio may be ramping up production at just the wrong time. This could mean more disappointing delivery numbers, which will be bad news for NIO stock.

As for its European catalyst, I am also doubtful that this company is a Tesla in the making. Unlike Tesla, which had a first mover advantage when it expanded outside the U.S., this EV maker is going global just as the rest of the auto industry moves big into electrified vehicles.

High competition could limit its ability to capture much of the EV market in Europe. A lack of success there may affect its plans to move into the U.S. EV market.

On top of all this, there may be other risks to the company. A recent “short report” from Grizzly Research makes numerous allegations. If just some of the allegations prove true, it could have a serious effect on its stock price.

The Verdict

Nio stock earns a D rating in my Portfolio Grader. While one of the more popular EV stocks, it’s definitely not one of the best ones out there. Its performance in the near-term hinges heavily on a re-acceleration in Chinese delivery growth. Given current economic conditions, this may fail to happen.

Instead, delivery numbers could continue to underwhelm. Competition could stymie its attempt to expand outside its home market. Instead of becoming the “next Tesla,” it may have to ultimately scrap its global expansion plans.

Many short reports prove to be little more than a case of making a mountain out of a molehill, yet it’s possible Grizzly Research is right on the money with its bearish view on shares. Even if Grizzly is only partially right, that may be enough to drag it back to its 52-week low.

With numerous negatives outweighing the positives, steer clear of 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.