The meme stock space faced a wall of selling on Wednesday, causing NIO shares to plummet.
The stock of the electric vehicle producer fell over 9% on the day to settle at $46.04.
The Chinese EV had already come to a halt at $54.86 barrier.
Yesterday, NIO shares hit a brick wall of selling as the meme stock carnage erupted, with nearly all of our favorite retail firms suffering significant losses. NIO was severely harmed, losing approximately 9% of its value. The shares were hurt by a broad sell-off in the meme stock universe, as well as the fact that the Chinese stock NIO received an extra unfavorable read-through from the DIDI crisis (read more). In our article “Three reasons why a fall to $42 in NIO is inevitable” on Wednesday, we warned against new longs because the stock had been overbought last week on the Relative Strength Index (RSI) and had slammed into resistance at $54.86.
According to NIO, the market capitalization of the company is $72 billion dollars.
Last 12 months Price/Earnings -83 Price/Sales 25 Price/Book 18 Enterprise Value $56 billion
Net Margin: 16 percent Gross Margin: 16 percent
Buy $54.89 based on the average Wall Street rating and price target
The market was jittery on Wednesday, with Chinese stocks in particular being affected by the DIDI issue, as previously noted. Concerns over the new delta form of covid, as well as some stretched equity prices, have added to the mix. Since plunging to roughly $30 in May, NIO has steadily increased in value. Since then, the stock has steadily risen in pace with other industry peers, with Tesla in particular having a strong June. The stock has gained almost 23% in the last month, so the loss must be viewed in context.
All Chinese electric vehicle manufacturers recently reported strong delivery numbers. LiAuto (LI) had a 166 percent YoY increase in June deliveries, XPeng (XPEV) had a 439 percent YoY increase in deliveries, and NIO had an almost 116 percent YoY increase in deliveries. BYD (BYDDF), the Warren Buffet-backed Chinese electric vehicle manufacturer, saw sales jump 102 percent year over year in June. Tesla (TSLA) also set a new milestone for vehicle deliveries in the first quarter of 2021, with over 200,000 units delivered. Despite worldwide semiconductor chip difficulties, all electric car manufacturers appear to be setting new sales records.
On Thursday, NIO shares narrowly brushed up against our $54.86 barrier before retracing slightly to settle just above the short-term 9-day moving average on Friday, just before of the long weekend. The stock was already under pressure on a technical level, and the DIDI news added to the mix. The rise from the mid $40s has been quick, despite a dearth of volume.
The issue with such a quick rise is that it sets the stage for a rapid fall if opinion shifts. NIO fell significantly due to a lack of volume, which is a cushion. A tiny support zone exists at $46 from the 21-day moving average, but the strong zone is $42, where the 200-day moving average is located and the volume profile appears to be much more robust.
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