Shares of Nio (NIO -3.08%), the Chinese electric vehicle marker, were tumbling this morning as investors digested two pieces of negative news: ongoing fears that some Chinese stocks could be delisted from U.S. exchanges and an analyst’s price target cut for one of Nio’s competitors.
The EV stock was down 3.5% at 11:21 a.m. ET.
First up, Nio investors may be a bit nervous today after the Chinese ride-sharing company Didi Global said that it’s being investigated by the Securities and Exchange Commission about its IPO last year.
Didi didn’t disclose many details about the probe, but it comes on the heels of the Chinese government cracking down on U.S.-listed Chinese stocks. Regulatory rules from both countries have caused the share prices of many Chinese stocks to tumble over the past year.
Nio investors are likely keeping a close eye on Didi’s news and wondering if more difficulties are ahead for other Chinese stocks.
Additionally, one of Nio’s EV peers, Li Auto, received a price target cut from Deutsche Bank analyst Edison Yu. The analyst lowered his price target for Li Auto from $34 to $28 before the company reports its earnings next week.
Nio investors may interpret the price target cut as a sign that Li Auto could report a disappointing quarter, indicating larger headwinds for the broader EV market.
Nio investors have been on a wild ride over the past year, as the company’s share price has plummeted by 57%. And investors should probably prepare for more share price swings.
The Federal Reserve is meeting today and tomorrow to make a decision about hiking interest rates to tackle inflation that’s reached a 40-year high. That’s putting a lot of downward pressure on stocks, and it could continue, as the Fed is expected to increase rates throughout the year.
That doesn’t mean Nio is a bad long-term investment, but shareholders should know that as the market processes shifting news about Chinese stocks, the economy, and inflation, there could be more instability from Nio’s stock.