Nio Stock Forecast: NIO ignores Shanghai lockdown as Chinese covid cases rise

Nio stock (NIO) opened 5.3% higher on Wednesday to $23.03. This was right in line with the company's 5.3% advance in Hong Kong earlier in the day. Shares of the "Tesla of China" managed to gain 3.2% to close at $21.88 on Tuesday, which is significant since $21 now appears to be acting as the main pivot point after NIO dropped to $13.01 just two weeks ago. Nio appears to be benefiting from the Chinese government's move to reduce the pain of its lockdown conditions in Shanghai. 

Nio Stock News: Covid lockdown continues in Shanghai

Beijing attempted to lessen the effect of the current covid lockdown in Shanghai by telling businesses it would provide tax rebates and other support. On Wednesday the government reported some 8,800 new covid infections, nearly 6,000 of which came from Shanghai. In addition to tax rebates, the government said it would reduce rents temporarily and also offer low-interest loans to small businesses.

Nio's factory is not affected since it is located in Hefei, unlike competitor Tesla (TSLA), but Nio's headquarters and some other adjacent operations are located in Shanghai and are affected by the lockdown.

Many "Cathie watchers" are wondering if the tech stock maven will purchase any more Nio shares. Cathie Wood's Ark Invest bought more than 420,000 shares on March 25 but has laid off since. One-time purchases are rare for the Ark family of funds. It is thought that steady buying by Ark could translate into a longer-term rally. In the meantime, Ark continues selling TSLA shares at nearly every session.

On March 24, Nio reported Q4 adjusted earnings of $-0.17, which missed by 3 cents, on revenue of $1.55 billion, $23 million ahead of estimates. In the fourth quarter, Nio delivered 25,034 vehicles. This amounted to a 44% increase YoY, but the new EV leader in China is guiding for delivery growth in the current quarter to be meagre.  Somewhere between 0% and 4% in sequential growth is what management forecasts.

Mostly, investors are shrugging off the poor guidance as Nio stands to introduce three new models in 2022 alone. Nio already began shipping the ET7 luxury sedan on Tuesday. The mid-size ET5 is slated for introduction later this year as well. Even if growth is flat this quarter, it seems unlikely to be so for the rest of the year.

NIO key statistics

Market Cap	$33 billion
Price/Earnings	N/A
Price/Sales	6
Price/Book	6
Enterprise Value	$28 billion
Operating Margin	-12%
Profit Margin	-29%
52-week high	$55.13
52-week low	$13.01
Short Interest	5%
Average Wall Street Rating and Price Target	Buy, $44.74

Nio Stock Forecast: Reversal in the cards

Though NIO shares are down 31% year to date and have been in a downtrend for nine months, as FXStreet stated on Tuesday, Nio stock sure seems like its gearing up for a reversal. As we wrote then: "[T]he price action between January 28 and March 15 demonstrated a lower low, but the Relative Strength Index (RSI) over that same time period shows a gradual trend higher. Not always but often enough, a divergence between lows on the RSI and the price chart portends a trend reversal."

On Tuesday, FXStreet mentioned the importance of $21. That level is the pivot point. Below here, NIO loses its strength and becomes bearish on the chart. $21 was significant as both resistance and support in the second half of 2020. $18.47 and $13.01 remain the medium and long-term support, respectively.

With today's price action, Nio stock briefly advanced ahead of the March 1 range high at $23.35. There is reason to believe if NIO can close above this level, then bulls can make a run at $26.27 – a more significant price level. Breaking this level pushes Nio back into bullish territory.

NIO 1-day chart