If I’d invested £1,000 in NIO shares 1 year ago, here’s what I’d have now!

NIO (NYSE:NIO) stock has proven to be one of the most volatile in the world. The market is clearly still struggling to appreciate the company with its stock swinging quite a bit after its monthly delivery figures.

Chinese electric vehicle (EV) manufacturers are among the most promising competitors Tesla. It offers a wide range of exciting and innovative vehicles, but it is still at a loss.

So, is NIO a good investment? Let’s take a closer look.

Volatile year

NIO is down 59% in a year. That’s huge, but it’s only part of the story. A year ago, the NIO was down about 70% from its peak during the pandemic.

So if I had invested £1,000 a year ago, today I have around £420. That’s because the pound is slightly weaker against the dollar than it was a year ago. NIO is not listed in the UK, so the best place to buy this stock is in the US where it is naturally listed in dollars.

Bottoming out

With the stock trading around $8.90, I don’t see it falling any further. After a general downward trend over the past two years, the price point now looks like a floor.

I would also suggest that the market has overreacted to negative updates and ignored the broader growth story. This week, the stock fell 10% after NIO’s shipments in March were lighter than expected, resulting in a Q1 total of 31,040 vehicles.

Investors may be in the “show me“phase, when they look for performance to match up with expectations for growth. This has not happened, but the forecast is still very positive.

Analysts project NIO’s revenue in the second half of the year to rise to $7.3bn. This represents an increase of close to 70% compared to the H1 projection. The company is still making losses, but is expected to turn a profit in 2024/2025.

Fair value

It’s hard to put a value on a loss-making EV company. The market is growing, but there are concerns about NIO’s ability to reach non-Chinese markets, given geopolitical tensions. Margins also fell in Q4, but I understand it was due to efforts to clear out old stock. Despite this, it remains very promising.

However, one way to generate an idea of ​​value is to use the price-to-sales ratio. NIO trades at 2.2 times sales, while Tesla trades at 7.4, and Rivian in 8.5.

So NIO is one of the cheapest EV stocks, and that’s amazing because I believe its unique battery replacement technology gives it a real advantage going forward. A NIO car can pull up to a NIO station and replace a dead battery in minutes.

Given its value relative to its American peers, and similar to Tesla in performance, I see NIO as very undervalued. That’s why I recently added to my portfolio.