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Citron Pulls Plug On Nio, Says Valuation 'Can Never Be Justified'

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Citron Pulls Plug On Nio, Says Valuation 'Can Never Be Justified'

Two years after Citron Research editor and notorious short seller Andrew Left made a bold bullish call on Nio Inc - ADR (NYSE: NIO), Left said Friday it’s finally time for investors to cash out of the red-hot EV stock.

Back in November 2018, Left compared Nio to Tesla Inc (NASDAQ: TSLA) when Nio was trading at around $7 per share. Today, Nio shares are trading at $53.

“After a rocky road of trading, NIO has found itself in unchartered territory that can never be justified by its current standing in the China EV market or its near-term prospects,” Left wrote Friday.

See Also: Will Tesla Or Nio Stock Grow More By 2025?

2 Vulnerabilities: Left said Nio has two major vulnerabilities in the near-term.

  • Tesla’s Model Y price cuts will apply significant pressure to sales of Nio’s ES6 hatchback model. Last month, Tesla sold nearly twice the number of vehicles in China that Nio sold, and Left is expecting China’s EV market to continue to be an intensely competitive pricing environment.
  • Left is not a fan of Nio’s share structure.

“While we commend Baillie Gifford (love those people) and early investors, right now we are looking at a share structure and an investor base that is more interested in spinning a casino wheel,” said Left. He also noted Nio's short interest is approaching a two-year low.

What Nio Investors Are Buying: Left said investors buying Nio today should understand what they are getting into.

“Anyone buying NIO stock now is not buying a company or its prospects, rather you are buying 3 letters that move on a screen,” he wrote.

Left said there are better ways to play the China EV story: “It is time for investors to rotate out of NIO, enjoy your profits and look for the next disruptive technology.”

Left's new price target for Nio is $25, suggesting more than 50% downside.

Benzinga’s Take: There’s no question the Chinese EV market will be a major growth story for years to come. But Nio’s market cap has now surpassed Daimler’s despite the fact that Nio sells roughly 5,000 vehicles per month and Daimler sells about 1 million vehicles per month.

Latest Ratings for NIO

DateFirmActionFromTo
Nov 2020Deutsche BankMaintainsBuy
Nov 2020B of A SecuritiesMaintainsBuy
Oct 2020JP MorganUpgradesNeutralOverweight

View More Analyst Ratings for NIO
View the Latest Analyst Ratings

 

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