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Is NIO stock really on track to hit $25? One short-selling firm thinks so.
Is it time to put it in reverse with Nio (NYSE:NIO)? After a long-lasting rally, a negative headline is sending NIO stock down 8%. What was the headline? And what does it ultimately mean for investors?
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Remember, Nio has been one of the best-performing stocks on Wall Street lately. Amid novel coronavirus and presidential election tension in the United States, investors have found comfort in Nio and its Chinese electric vehicle peers. Importantly, impressive delivery numbers, quarterly earnings and EV advancements have backed up this group. Just today, we saw Li Auto (NASDAQ:LI) and Xpeng (NYSE:XPEV) rally higher on some of these news items.
So with all of this working for Nio, why are shares plunging on Friday? Well, investors can thank short-selling firm Citron Research for the decline.
Two years after Citron recommended NIO stock, the firm says it is pulling the plug. So what explains the change in sentiment? In an already-trending report, the firm claims that shares will soon fall back down to the $25 zone thanks to competitive vehicle pricing by Tesla (NASDAQ:TSLA) and its “unchartered” rally. As Citron put it, the current share price could “never be justified” by the Chinese EV market.
Unsurprisingly, those bold words are sparking fear. NIO stock has had an incredible journey in 2020, posting gains of more than 1,000% in the year to date. In fact, in just the last month, shares have climbed 100%. Ahead of earnings next week, investors have been paying close attention. Can Nio keep revving up, or is Citron Research right?
A Different Perspective on NIO Stock
As you consider the short-selling report from Citron Research, be sure to remember that there are other perspectives. Yes, even acknowledging the seemingly unprecedented rally in NIO stock, there are analysts who think shares will keep climbing higher.
In fact, positive headlines had NIO stock climbing higher earlier this morning. Investors learned that RWC Asset Management, a London-based company, was diving into Chinese equities. Nio made the top of the new purchases list along with Pinduoduo(NASDAQ:PDD) and New Oriental Education and Technology Group(NYSE:EDU). This just goes to show how volatile some of these hot names are in the stock market.
InvestorPlace Markets Analyst Luke Lango is also bullish on NIO. Earlier in October, he reviewed the potential for the electric car market in China, noting that it is the largest automotive market in the entire world. His conclusion? Simply put, Lango believed at the time that Nio could soon hit $60.
In other words, there is no reason for EV bulls to panic. Do your own research and consider the Citron report against several other arguments.