It’s been a bumpy ride for investors of China-based electric vehicle (EV) manufacturer Nio (NYSE:NIO) over the past year. Some data points indicate that a rebound in NIO stock might be coming, but don’t jump to any conclusions. If Nio is spending much more money than it’s generating, this will make it difficult for the company to deliver consistent value to the shareholders.
As InvestorPlace contributor Thomas Niel observed, Nio is facing several headwinds in 2023. These include the end of government-sponsored EV subsidies in China and fierce competition from Tesla (NASDAQ:TSLA) as well as local EV manufacturers.
Nevertheless, some of Nio’s shareholders are staying in the trade and hoping for a comeback. Anything is possible, but unfortunately, the financial facts don’t look positive for Nio.
NIO Stock Can’t Seem to Get Back on Track
Like it or not, Nio’s investors will probably have to adjust their expectations. The idea that NIO stock can get back to $60 in 2023 isn’t very realistic at this point. Over the past year, the share price has declined from $20 to less than $9.
Along the way, Nio has had some hits and misses. For instance, what happened to the company’s attempt at launching a smartphone? It seems that the so-called NIO Phone may be a non-starter. Or, if it does launch this year, don’t be surprised if the NIO Phone isn’t a blockbuster hit.
Also, Nio just closed its insurance brokerage subsidiary company due to regulatory problems. But hey, at least we can say that Nio is continuing its venture into the European EV market. Only time will tell whether the recently introduced Nio ET5 station wagon, also known as the Nio ET5 Kombi, will gain traction among European car buyers.
Nio’s Earnings Loss Is Getting Out of Hand
It’s understandable that Nio is proud of its EV delivery growth. Investors should be impressed that Nio delivered 12,157 vehicles in February, up 98.3% year over year (YOY).
Furthermore, Nio delivered 40,052 vehicles during 2022’s fourth quarter, up 60% YOY and 26.7% quarter over quarter (QOQ). However, this isn’t the full story. Nio still has work to do in certain crucial areas.
In particular, Nio’s vehicle margin collapsed to just 6.8% in Q4 2022, compared to 20.9% in the year-earlier quarter. And, perhaps most alarmingly, the company’s net loss attributable to Nio’s ordinary shareholders skyrocketed to the equivalent of $847.7 million, up 168.3% YOY.
Nio reported that its cost of sales in Q4 2022 increased 88.3% YOY and 37.1% QOQ. This was due to several factors, including “higher battery cost per vehicle.” Sure, inflation has been an international problem during the past year. Still, Nio really needs to find ways to contain its costs and thereby bolster its bottom line in 2023.
So, Will NIO Stock Go Back Up?
Nio’s loyal shareholders are in a tough situation. The company’s rapid EV delivery growth didn’t result in a share-price increase. Moreover, Nio appears to be a money-losing operation.
Therefore, unless Nio demonstrates that it can shrink its net earnings loss, don’t expect NIO stock to go back up. For now, it’s wise to continue monitoring Nio’s vital stats without making any share purchases.
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.