Shares of Nio (NYSE: NIO) dropped 8% intraday Friday after announcing that it would be halting production at one of its plants for a few days because of a semiconductor shortage while lowering its delivery outlook for the first quarter.
In a statement today, the Shanghai-based company said that it expects to deliver roughly 19,500 cars in the first three months of the year, down from its previous guidance of between 20,000 to 20,500. The electric vehicle giant will be suspending production at its JAC-NIO manufacturing plant in Hefei for “five working days” beginning on Monday.
While investors didn’t take kindly to the news, Nio did warn in its latest earnings call that it could face production challenges because of the global chip shortages.
William Li, the chief executive officer has said that manufacturing would pick back up again by July. However, Barclays analyst Brian Johnson, who does not cover Nio, has feared that chips might be in scarce supply still as 2021 wears on.
Of course, Nio isn’t alone, as chip shortages have impacted others in the auto industry; Ford (NYSE: F) General Motors (NYSE: GM), and Hyundai (OTC: HYMTF) have all been forced to cut production.
Last month, data firm IHS forecasted that close to 1 million global light vehicles are in jeopardy of not getting built in the first quarter.
Dealing with chip shortages is bad enough, but various headwinds are surrounding Nio right now. Since last month, Nio along with other growth stocks have been sliding on fears of rising interest rates.
But things have gotten much worse in the past week for Nio, as trade tensions between Washington and Beijing have escalated. Last week, U.S. Secretary of State Antony Blinken met with top Chinese officials in Alaska--and let’s just say the two sides didn’t exchange love letters. But that’s not all: Earlier this week, the U.S. Securities Exchange Commission said it adopted interim final amendments to implement measures under the Holding Foreign Companies Accountable Act, a bill signed into law by President Biden’s predecessor in late 2020 that could delist Chinese companies trading on U.S. Exchanges if they refuse to comply with auditing standards.
So investors are panicking and selling stock in Chinese U.S.-listed firms.
Overall, shares of Nio have fallen 45% since peaking at $62.84 on Feb. 9. Even though trade tensions and chip shortages could cause problems for Nio for much of 2021, there’s now a big buying opportunity at the dip. After all, the EV industry still has plenty of room to grow.
The consensus among Nio is a “Moderate Buy,” based on 10 analysts' ratings that have an average price target of $63.64, according to TipRanks. That price target represents 83% upside from its current trading levels.