While it is true that you can make money with penny stocks, it is also necessary to keep in mind that there are plenty of associated risks. More often than not penny stocks belong to very small companies. Quite often these stocks are not listed on mainstream exchanges like the NASDAQ or the New York Stock Exchange.
However, the penny stocks that are listed on the major exchanges also suffer from the problem of volatility. If an investor has a tolerance for risk, then they should start looking into some penny stocks to buy. This year has been wild for a few of these kinds of penny stocks.
Chinese electric car maker Nio Inc (NIO Stock Report) is one of them. We first reported on this company when it originally became a penny stock. But has the consolidation run its course or is Nio bound for lower lows? Here is a closer look at the company.
A Bad Year For This Penny Stock
The Chinese electric car manufacturing sector has grown at a breakneck pace over the past few years. NIO has emerged as one of the more important companies in that regard. However, 2019 has not been a great time for the company. Why? For starters, it began the year on the wrong foot as deliveries dropped in the first quarter of the year. The company had listed on the New York Stock Exchange around a year ago. At the time of its listing, it had managed to raise $1 billion.
After its debut, the stock had reached $14 a share. But as you’ll see it now trades under $3 a share. According to experts, this penny stock doesn’t seem to be the best option for the foreseeable future.
Over the course of the year, the penny stock has been in a free fall. In fact, it has lost as much as 80% in value so far. According to analysts, the economic slowdown in China and muted domestic demand for premium electric vehicles has hurt the company considerably. On the other hand, the weakening delivery figures are a major red flag. That’s considering the fact that the electric vehicle industry is totally dependent on raising the delivery volumes progressively.
The other big reason why the future could look a bit bleak for NIO is the fact that the electric vehicle industry in China is going to grow at a rapid pace. You may think that is a good thing and overall, it is. But the company will be faced with stiff competition from plenty of upcoming companies. So Nio will need to find a way to stay ahead of these headwinds.
Even in light of these events, this is still one of the more popular penny stocks on Robinhood. If you aren’t familiar with the application, it’s one of the most popular platforms, especially for millennials. As of August 26, Robinhood shows that more than 92,000 of its users own NIO stock.
Of course, this isn’t an indication that NIO is a penny stock to buy or sell but it is important to note. If there are thousands of investors watching such a stock, it will be interesting to see how this electric car company can turn things around. For now, NIO remains one of the penny stocks to watch this year.
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