Nio Inc (NYSE: NIO) is defying gravety in the market early on this morning. The stock with a big debut has grabbed the attention of tech and automobile lovers alike. Unfortunately, these gains aren’t going to last. Today, we’ll talk about:
- Why NIO will likely crash;
- what we’re seeing from the stock today; and
- what we’ll be watching for ahead.
Why NIO Is Going To Crash
As mentioned above, Nio has garnered the attention of investors since its debut in the mrket just a few sessions ago. The stock saw tremendous gains the day after it debuted and has been a bit bouncy since. Nonetheless, it is climbing in the market this morning. However, I’m here to tell you that the gains in NIO aren’t here to stay.
First and foremost, I want to be very clear here. I like the company’s products, I think that there’s opportunity in the market, and if the company executes well, the stock will likely do well in the long run. However, with that statement out of the way, there is one big issue that the company faces.
Currently, NIO is burning through way too much money. In the year 2017, the company burnt through more than $700 million. That’s a massive amount of money to burn. At this rate, the company will run out of the cash it got its hands on through the IPO in a year. Not to mention, losses are growing at a tremendous rate, so, there’s a chance that the company will run out of money faster.
At the end of the day, once the IPO-related excitement wears off, I believe that investors will focus on the financial data and the stock will start to tank as a result.
What We’re Seeing From The Stock
With the recent IPO, investors are excited at the moment, and I believe that this excitement is blinding investors to the real data. Nonetheless, the excitement is pushing the stock toward the top. As is normally the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (10:01), NIO is trading at $9.18 per share after a gain of $0.68 per share or 8.00% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on NIO. In prticular, we’re interested in following the story surrounding the company’s efforts to hit ambitious production and sales targets. As mentioned above, if executed well, this could be a great opportunity. However, in the short term, things aren’t looking so hot. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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