10 Worst Chinese Stocks to Buy Right Now According to Short Sellers

5) NIO Inc. (NYSE:NIO)

Short % of Float (8/30/2024): 13.06%

Number of Hedge Fund Holders: 20

NIO Inc. (NYSE:NIO) operates in China’s premium EV market. It designs and jointly manufactures, and sells smart and connected premium electric vehicles, driving innovations in next-generation technologies in connectivity, autonomous driving, and artificial intelligence.

Short sellers believe that weaker demand and an intense price war in NIO Inc. (NYSE:NIO)’s home market, China, at the start of 2024 prompted several EV makers to decrease their prices and provide big promotions. NIO Inc. (NYSE:NIO) did the same, which weighed over its bottom line. Earlier, the company reduced its first-quarter delivery guidance to 30,000 vehicles, compared to guidance of 31,000 – 33,000 units.

Before this, NIO Inc. (NYSE:NIO) saw deliveries of over 50,000 units for its 4Q 2024. These were down ~9.7% on a sequential basis. Therefore, declining deliveries and compression in the margins are other risks that are being highlighted by the short sellers. Also, the potential for operational delays in scaling production and expectations of weaker demand for EVs might impact its stock price.

However, Wall Street analysts believe that NIO Inc. (NYSE:NIO) is well-placed to recover in 2H 2024. The improvement in financial performance, a strong and healthy pipeline of new models, increased sales volumes, and favorable industry conditions in the country’s rapidly expanding new energy vehicle (NEV) market are some of the factors likely to support the company’s stock. Analysts are quite optimistic about NIO Inc. (NYSE:NIO)’s upcoming launch of the L60 model, which already generated positive feedback.

Wall Street believes that the company’s stock should be supported by an improved product mix and scale efficiencies. Collectively, these factors are expected to result in gross margin expansion.

Analysts at JPMorgan Chase & Co. raised the company’s shares from a “Neutral” rating to an “Overweight” rating. The company raised its price target on the shares of NIO Inc. (NYSE:NIO) from $5.30 to $8.00 on 6^th September. It was held by 20 hedge funds in 2Q 2024, with total stakes worth $82.1 million.