To The Moon

$NIO Inc.(NIO)$  share price fell 10% last week, and it is believed that the market is reflecting the impact of the tight third-quarter results. NIO's stock price fell sharply because of the widening net loss and concerns about the macro economy. The company's deteriorating fundamentals and falling stock prices may only be the beginning. I believe that NIO may enter a long winter in the electric vehicle industry in the future. Even if the group has a strategy to enter Europe, it is inevitable. There are mainly these reasons. In addition to the long-term net loss, the company is also facing some strong headwinds in its development, such as increased competition, continued epidemic lockdowns, possible new epidemic lockdowns, and the recession of the Chinese economy, etc. 

The following points are detailed: 

1) Weilai Automobile experienced a widening loss in the second quarter of this year. It is undeniable that China's electric vehicle industry is developing very rapidly, and the government's support is also very strong. However, traditional car manufacturers are also entering the field of new energy vehicles and directly compete with pure electric vehicle manufacturers such as Weilai Automobile. It is expected that NIO will continue its net loss in the future.

2) In addition to the company still losing money, NIO’s current free cash flow is also negative. What’s more worrying is that if its free cash flow continues to be negative, then their capital expenditures will also be at risk. middle. Because the market values ​​such companies based solely on their future growth potential, once growth capital expenditures are in jeopardy, there is a risk that the market will significantly re-evaluate their valuations; even affecting the company operate.

3) NIO's valuation is very high based on points 1 and 2. And because of the lack of profits, metrics like price-to-earnings ratios, price/cash flow multiples, etc. don't make sense to him. Not attracting investor support. This is a reflection of the current weaker strength of the company. 

4) The macroeconomic risks NIO faces are also emerging. Examples include growing concerns about U.S.-China relations, the impact of the coronavirus lockdown, and concerns about an imminent Fed rate hike. Even though lockdowns in China's major cities have been lifted, the impact of those lockdowns on the region has created concerns for forecasters of the region's economic development, such as concerns over the impact of coronavirus restrictions on supply chains and consumer demand across the region The destruction caused a very big blow to Weilai Automobile. 

The above points are to take a look at the prospects of Weilai Automobile. I think that based on the bleak outlook, it is not appropriate to invest in the new energy vehicle sector for the time being. Except for the worsening of NIO, most of the new energy vehicle stocks are the about to go strong as the market has begginnning to revive.

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