Nio Could be a Penny Stock Very Soon

Nio (NYSE:NIO) shares broke down on Sept. 24 after the company reported terrible quarterly results. The numbers were so bad that the company delayed its conference call and moved it to Sep. 26. And while Tencent injected $200 million through a convertible notes offering, investors are dumping the stock.

Nio closed at $1.75 last week after losing 42.4% post-earnings. It disclosed deliveries of 3,140 vehicles in Q2, down from 3,989 in Q1. This includes 413 ES6s. When China has billions of people, selling just so few vehicles is disheartening. With sales gaining no traction, Nio will have a tough time scaling out its charging stations throughout the country. 22% of Nio owners in China do not have home charging stations, so they will need other power solutions.

Nio will run out of money before it may expand its power services. Still, if Nio repositions itself as a charging providers for other EVs, including Tesla (NASDAQ:TSLA), that may offset the capital cost requirements of supporting Nio owners with their energy needs.

Headwinds

The tempered market conditions will force Nio to implement cost-control measures again. It will need to shrink its sales and service network. It must also curtail its R&D activities. With growth no longer a characteristic of Nio’s business, this stock could continue sinking.