This report analyses NIO Inc’s stock for the week commencing 2nd August 2021; this is done using StockGeist, a platform that provides market sentiment indicators of a stock in real time – by applying natural language processing to the latest news updates and social media posts. All times are given in GMT+0.
Company Overview
NIO Inc, founded in 2014, is a ‘pioneer in China’s premium electric vehicle market’. Based in Shanghai, they are vertically integrated across business lines to both manufacture and sell premium electric vehicles (EVs); specifically focusing on developmental autonomous driving and EV artificial intelligence technology. Now operating globally and floating on the NYSE, NIO’s ESG-focused sustainability serves as a USP that has helped expand the company worldwide.
Historical Analysis – 2020 & Jan-Aug 2021
As can be seen above, the 6-month change from the beginning of 2020 saw poor stock value growth for NIO, with little volatility; possibly due to a relative lack of intraday/intraweek trader interest, or lack of predictability discouraging trade positions, the future of NIO’s stock price was irresolute. This is unsurprising, due to contradictions in NIO’s 12/31/2019 income statement: total revenue showed strong growth of 36.73%, but was outstripped by a 42.30% increase in the total cost of revenue.
Further, an increasingly negative EBITDA and declining gross profit were offset by NIO’s early stages of development; only developing its first EV model in 2016. In a capital-intensive industry requiring high initial capital input, with profits not usually seen until years later, the lack of bearish movement in NIO’s stock price – despite the statistics – was understandable.
Though, in July 2020, the company’s strong vehicle delivery sales proved that NIO is far more than a start-up; and investors took notice. On July 01, the stock price value was $7.91 (USD). By July 02, it had risen 18.58% to $9.38 (breaking through a price ceiling), before hitting $11.51 on July 06 – and surging up to $14.98 by July 10. Growth was short-lived, however, as skittish investors likely caused the bearish outlook that saw a decline back down to $11.09 by July 17.
But proceeding through 2020 was an upward price trend which highlighted NIO as a stock with huge potential for growth, exacerbated into potential long-term sustainable high growth by the Chinese government’s claim of a powerful push for a full transition to EVs in the country. A bullish period saw this equity’s stock price movement reflecting upward trends of the EV markets in China and the US, with price growth of 399.37% from July 17 to November 23(-closing at $55.38).
For the remainder of the year, intensifying market competition affected NIO’s market value. An EqualOcean algorithm calculated NIO’s share in China’s EV market to be 2.84% in November, declining from October’s 3.42%. With a market value previously heavily dictated by monthly and quarterly vehicle deliveries, the share price reflected NIO’s lessened likelihood to beat its 4Q expectations – dropping through a technical price floor to a low of $46.14 on December 29.
In 2021, traction increased around the stock, bringing increased volatility and fluctuations in the first month. This high trading traffic likely led to the market downplaying China’s Finance Ministry deciding to reduce subsidies for EVs by 20% on December 31, 2020. Albeit, the likelihood is that delayed bearishness then set in to produce a price crash from $60.33 on February 10 to $35.21 on March 08.
Although, with NIO unstoppably heating up as an investment opportunity, brief technical analysis could explain large fluctuations in the most recent few months. Following spikes, RSI values exceeded 70, indicating overbuying. Additionally, the ATR has also seen hikes in its value. Moreover, the newest overall downtrend may be due to NIO’s struggle against Chinese regulatory crackdown; NIO slipped down 13.68% from July 08 to July 27. Volatility currently shows no signs of subsiding.
Recent analysis – week commencing 2nd August
NIO Inc’s share price made a positive start, rising $2.13 to peak at $46.78 for the week commencing August 02. Market bearishness, though, saw a swift reversal as the following day brought a low of $42.76, closing at $44.57. The price rebounded a little, before finishing again in a bearish fashion with a final intraday change of -3.86% to close for the week at $43.84 (on August 06). Overall, a mostly sideways stock movement for the week, likely changing with intraday trading sentiment as the Chinese regulatory saga continues to hound NIO’s stock price.
Accuracy Test: w/c 2nd August 2021
This analysis was performed to determine whether positive messages detected by StockGeist translated into an increase in stock price vice versa for negative messages; specifically for NIO stock trading in the week commencing 2nd August. Please note that this analysis is not investment advice.
Methodology
Using StockGeist’s stock sentiment data displayed above, different thresholds were identified to determine whether each hour-long period has a ‘large’ amount of positive or negative messages. A percentage was then calculated to determine how often the value of the stock would fluctuate under the noted threshold. The average hourly price change for that threshold was also calculated, by subtracting the opening price from the closing price. For example, when there were 50% fewer (0.5x) negative informative messages than positive messages, the share price would decrease by 0.64% on average.
Results and Reflections
The accuracy test indicates the existence of a correlation between the relative number of positive/negative messages and the value of the stock. Negative informative messages in particular show a stronger correlation; for example, moving from a threshold of 0.25x to 0.5x provided a 0.55% increase in the magnitude of average hourly price reduction, with growing accuracy in predicting depreciations. Despite this, emotional messages and their sentiment data clearly displayed considerable correlation with the average fluctuation of share price, perhaps displaying the heightened role of social media in the stock market and the growing popularity of recreational trading. While the informative positive messages may not have been entirely accurate in determining increases in NIO’s share price (see the decrease in average hourly price change between the 1.1/1.25x and 1.5x thresholds), it is important to remember that this data works best in conjunction with the additional information provided by StockGeist (fundamental metrics, the word cloud and stock rankings).
Outlook
At the moment, NIO Inc’s stock price constantly fluctuates, in part caused by the ongoing red tape, conflict with domestic rivals (Li Auto and XPeng) as well as uncertainty surrounding a global shortage of automotive semiconductors. While this is all uncertain, this analysis has indicated StockGeist as a useful trader sentiment tool in understanding the feel of the market in real-time, along with which direction the stock is likely to take. Alternatively, you can incorporate our data into your own project with our stock news sentiment API.
