`The selloff in U.S. stocks deepened on March 13, and the broad-based S&P 500 Index ($SPX) joined the tech-heavy Nasdaq Composite ($NASX) in correction territory, which by definition is a drawdown of 10% or greater.
The escalating trade war is making the market jittery. Moreover, concerns over U.S. economic health have ignited after several indicators show a cooling off. President Donald Trump has predicted a “period of transition” for the world’s largest economy while not ruling out the possibility of a recession. Treasury Secretary Scott Bessent sees a “detox period,” which he later clarified does not necessarily mean a recession.
All said, recession odds are rising, especially as retailers like Walmart (WMT), Target (TGT), and Dollar General (DG) have given a rather bleak picture of consumer spending, which accounts for over two-thirds of the U.S economy.
While penny stocks might not be on your radar as tariff and growth worries rattle markets, I find Nio (NIO) one name that should be on your list as the Chinese electric vehicle (EV) company is flirting with the penny stock category yet again.
NIO Becomes a Penny Stock Yet Again
After the crash on March 13, NIO’s share price fell below $5, which is the threshold for penny stocks. To be sure, this is not the first time that Nio has entered the penny stock category. The “Tesla of China” first became a penny stock in April 2019 and remained one for over a year. It again flirted with the penny category in 2024 and traded below $5 earlier in 2025 too.
NIO stock has come under pressure yet again amid the broad-based selloff in markets. Notably, while Nio is a penny stock, it is not the typical penny name as it still boasts a market capitalization of around $10 billion. That, however, is a far cry from the over $100 billion market cap that the company commanded at its peak in early 2021. However, Nio’s dream run ended soon after and it has closed in the red for four consecutive years after rallying over 1,100% in 2020.
Nio failed to live up to the hype it created in its early days with its premium electric cars and battery swapping technology. Macroeconomic weakness, global supply chain issues, and massive competition in the Chinese EV market took a toll on NIO. To make matters worse, many countries clamped down on EV imports from China.
Is NIO Stock a Buy?
Meanwhile, NIO’s operating and financial performance has improved significantly over the last year. Nio’s annual deliveries rose 38.7% year-over-year to 221,970 in 2024. Its deliveries gained traction in the back half of 2024, rising to a record monthly high of 31,138 in December.
In the first two months of this year, NIO’s deliveries rose 48.8% to 27,055. During its third-quarter earnings call, Nio said that it expects deliveries to double in 2025, which implies shipments of roughly 440,000 this year. The company expects its Onvo and Firefly brands to drive volumes. Nio has already started selling cars under its lower-cost Onvo brand and expects to start Firefly deliveries in the first half of the year.
Nio posted double-digit gross margins in Q3 2024, and importantly, it generated free cash flows during the quarter. The company expects 2025 gross margins of 15% and 10%, respectively, for the Nio and Onvo brands. Over the long term, the company set a gross margin target of 20% for its namesake brand and 15% for Onvo.
Notably, while the macro environment for U.S. stocks has worsened over the last few months, things are not looking all that bad for China. The country has set a GDP growth forecast of “around 5%” for this year and is looking to provide more support to its economy. Along with the multiple stimulus measures, President Xi Jinping’s meeting with Chinese entrepreneurs earlier this year was a sign that the country is warming up to the private sector after the brutal tech crackdown in 2021.
From a valuation perspective, Nio trades at just 0.83x its expected sales for the next 12 months. If management can deliver on the kind of delivery and gross margin numbers it has forecast for 2025, the stock should have room to run much higher from these levels.
Overall, Nio remains one penny stock that I am keeping on my radar and would consider buying more of as the shares get crushed amid the broader market turmoil.
On the date of publication, Mohit Oberoi had a position in: NIO . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
