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Small Cap Trading Frenzy Drives Penny Stocks In October

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Speculative fervor took a boost in September trading as the Russell 2000 small cap index broke into a bull market, driving penny stocks, according to Investopedia. The top two performers in September’s penny stocks to watch list, RADA Electronics Industries, Ltd. and 22nd Century Group, Inc., sustained their top positions in October, an unusual occurrence.

Three of the other top September stocks, Intrepid Potash, Inc., Moleculin Biotech, Inc. and Zynga, Inc., gained higher positions in October, reflecting the continued strength of biotech and technology.

The technical conditions supporting these equities should persist through the fourth quarter and into 2018, portending multi-year highs for many of these issues.

Source: Investopedia

1. RADA Electronic Industries, Ltd. (RADA)

RADA Electronic Industries, Ltd. (RADA), a defense electronics system of advanced electronic systems for airborne and land applications, sustained its top spot for the second consecutive month.

RADA Electronics broke out to a 2-year high during the period.

After joining Nasdaq in the 1990s, the stock suffered a multi-decade decline. It ground out a series of lower highs and lows through January 2016’s all-time 54-cent low.

The stock spent 16 months moving sideways in a narrow basing pattern before turning higher in May 2017 and rallying back to 2016 resistance at $1.78.

The stock cleared major resistance at $2.25 in July 2017, entering an uptrend that’s now filling the July 2015 gap between $2.50 and $3.60. Buying pressure remains strong, raising odds it will test 2015 resistance near $4.00.

Following capital raising activity with institutional investors, the company recently converted loans to equity and increased its net cash position by $13.3 million while reducing ongoing annual interest payments by approximately $250,000.

On Aug. 21, RADA completed a $10 million capital raise under an existing shelf prospectus, issuing 4,604,500 shares. The investors included leading Israeli institutional investors, such as Yelin-Lapidot Investment House, More Investment House, Noked Capital, and The Phoenix Insurance Company.

From Aug. 17 until Sept. 5, DBSI, the company’s primary shareholder, exercised warrants and converted a loan to equity. It sold a portion of the shares gained to institutional investors such as Optimus Fund and others. On a net basis over the period, DBSI increased its shareholding in RADA by 1,168,782 shares to approximately 12.2 million shares, representing 35% of the company’s equity on a fully diluted basis.

Source: Investopedia

2. 22nd Century Group, Inc. (XXII)

22nd Century Group, Inc. (XXII), a plant biotechnology company that provides tobacco harm reduction and development of proprietary hemp/cannabis strains, rose from the number three spot in August to number two in September. The stock posted its highest high since July 2014.

In 2013, the stock broke out above multi-year resistance near $1.50, rallying to a record high a few months later at $6.36. It then began a persistent decline through August 2015 before finding support at 56 cents, followed by a bounce to $1.75.

The stock traded within these boundaries for 22 months, bouncing at support three times and reversing at resistance in equal measure. The price returned to that level a fourth time, improving odds for a breakout that could double the price in the year’s second half.

22nd Century Group found support near 70 cents in the second half of the year, testing that level three times ahead of a March 2017 uptick that has now reached ranged resistance. A breakout over $2.00 should draw strong buying interest favoring a high percentage rally back to its three-year high.

The stock hit its highest high since 2014 on August 7, 2017, and pulled back to the 20-day SMA, testing support around $2.00. This price level could offer a platform for continued upside that reaches longer-term resistance near $4.00.

The stock joined the Russell Microcap Index four months ago, when FTSE Russell reconstituted its U.S. and global equity indexes.

Membership in the Russell Microcap Index signifies automatic inclusion in the value style indexes. FTSE Russell determines membership for its Russell indexes primarily by objective, market-capitalization rankings and style attributes.

22nd Century Group focuses on genetic engineering and plant breeding that allows the increase or decrease of nicotine levels in tobacco plants and cannabinoids levels in cannabis plants. Its primary goal for tobacco is to lessen the harm caused by smoking. The primary goal for cannabis is to develop proprietary hemp/cannabis strains for new medicines and agricultural crops.

Source: Investopedia

3. Intrepid Potash, Inc. (IPI)

Intrepid Potash, Inc., the number four penny stock to watch in September, rallied 24% to a 23-month high, jumping to the number three spot in October, displacing Trilogy Metals, Inc.

The only U.S. producer of muriate of potash, Intrepid Potash moved from the number nine spot in August to number four in September.

In 2010 the stock suffered a decline that reached an all-time low at 65 cents in March 2016. The stock then rebounded above $1.50 in June before a December 2016 breakout that soon stalled at $3.04.

A stair step bounce reached a 21-month high at $3.93 on Aug. 3, 2017, giving way to a rectangular consolidation with support near $3.15.

Intrepid generated a second quarter net loss of $5.9 million, or $0.05 per share, delivering a first half net loss of $19.6 million, or $0.19 per share. This marked an improvement over the net losses of $13.4 million, or $0.18 per share, and $31.8 million or $0.42 per share, in the second quarter and first half of 2016, respectively.

Improvements in year-over-year net loss per share were driven in part by a gain in outstanding shares from the March 2017 secondary offering.

Consolidated gross margin advanced to $3.7 million and $0.8 million in the second quarter and first half of 2017, respectively, against the prior year. Improvements were due to lower cost solar potash production and higher average net realized potash pricing that offset lower average net realized sales prices for the product, Trio.

Cash provided by operating activities rose year-over-year to $9.7 million and $11.5 million for the second quarter and first half of 2017, respectively. Increased cash flow was due to strong spring demand, increased potash prices, and the elimination of costlier conventionally mined potash from the production profile.

Source: Investopedia

4. Moleculin Biotech, Inc. (MBRX)

Moleculin Biotech, Inc. (MBRX), the number seven penny stock to watch in September, moved to the number four spot in October,

The stock went public in June 2016 at $8.99 and began a downtrend that continued to post new lows into May 2017 before it bottomed out at 71 cents. A June test held support, ahead of an uptrend that completed a high volume base breakout which saw the stock rally to an 8-month high at $3.75 by the month’s end.

A pullback in July found support at the 50-day EMA, causing a bounce to range resistance, followed by a decline that could attract strong buying and continued upside toward $6.00.

The company recorded a net loss of $3.3 million in the second quarter of 2017 for the change in fair value on revaluation of its warrant liability associated with warrants issued in conjunction with its stock offering in February 2017.

The company recorded a gain in the second quarter of 2017 of $1.2 million related to expiration of warrants issued as part of the February 2017 stock offering.

The net loss for the three months ended June 30, 2017 was $2.3 million, including non-cash income of $1.2 million related to a gain recognized on the expiration of warrants, which was offset by a non-cash expense of approximately $3.3 million on the change in fair value of the company’s warrant liability. The net loss also included additional noncash charges for $0.1 million for stock based compensation and other stock based expenses.

As of June 30, 2017, the company had $9.3 million in cash and cash equivalents compared to $5.0 million at Dec. 31, 2016. Through June 30, 2017, $3.2 million in cash was received from the exercise of warrants issued in the February public offering. Cash used in operations was $3.4 million for the period ending June 30, 2017.

Source: Investopedia

5. Zynga, Inc. (ZNGA)

Zynga, Inc., the number 10 penny stock to watch in September, moved up to the number five spot in October.

A company whose mission is to connect the world with games, Zynga went public in December of 2011. The stock reached an all-time high at $15.91 in March 2012, then dropped in a straight line to $2.09 in November, ahead of a bounce that stalled near $6.00 in 2014.

The stock found support at the 2012 low in the first quarter of 2016, then turned higher, rallying to a three-year high in June 2017. Price action since then made a symmetrical triangle on top of the 200-week EMA.

The company achieved record mobile revenue of $179.9 million and bookings of $181.6 million in the second quarter, with revenue up 30% year-over-year and bookings up 33% year-over-year.

Mobile commerce now represents 86% of total revenue and 87% of total bookings, respectively. Mobile online game revenue was up 39% year-over-year, and mobile user pay bookings were up 45% year-over-year. The company’s mobile audience reached 19 million average daily active users, up 28% year-over-year and the strongest since Q4 2014.

GAAP operating expenses for the quarter were 67% of revenue – down from 73% of revenue for the same period in the second quarter of 2016, while non-GAAP operating expenses were 58% of bookings – down from 68% of bookings a year ago.

The company recently delivered its first quarter of GAAP pre-tax profit since Q4 2012, due in part to progress in improving operating leverage and the lowest quarter of stock-based compensation expense in more than three years.

The company generated operating cash flow of $37.8 million, which was the best quarterly performance in five years.

Source: Investopedia

6. Xplore Technologies, Corp. (XPLR)

Xplore Technologies, Corp., which manufactures tablet PCs, declined from a high at $100 in 2010 to $3.05 in 2013. The stock entered a recovery wave that stalled near $7.50 in 2014, before failing to test that level in 2015. The stock collapsed in June 2016 before finding support at an all-time low at $1.54 in June 2017.

The stock recovered above the 2013 low in August, then fell into a symmetrical triangle which could yield a vigorous rally up to 2015 resistance at $6.15 in the next few months. A buying spike above $3.70 could set that recovery into motion.

The company’s mobility solutions are designed for the energy, utilities, telecommunications, military, manufacturing, distribution, public safety, health care, government and field service sectors.

For fiscal quarter one for 2018, ending June 30, 2017, the company reported revenue of $20 million, a 21% gain year over year and a 30.9% gross margin. EBITDA was $839,000 compared to $1.1 million in the first quarter of 2017. GAAP net income was $239,000.

Source: Investopedia

7. Plug Power, Inc. (PLUG)

Plug Power, Inc., a manufacturer of fuel cells, sold off from a split-adjusted $1,565 in 2000 to an all-time low at 12-cents in 2013. The stock turned higher in March 2014, but stalled at $11.72 before falling to 83 cents in March 2017. In the last six months, the price spiked to $2.70, before suffering another fall. A breakout should target the May 2014 low at $3.65, which would mark a high percentage rally from the current level.

The Plug Power plant in Latham, N.Y. has ramped up manufacturing to deliver third quarter production, which will be the largest quarter in the company’s history, with an estimated 10 GenKey hydrogen fuel sites and nearly 3,000 GenDrive units to be deployed.

In addition to the ramp up, the second quarter 2017 saw continued efforts to improve he business model, boost margins and expand its customer base.

The company kicked off the second quarter signing a strategic GenKey agreement with Amazon, which will generate about $70 million in revenue for 2017. On July 21, the company announced an agreement with Walmart to provide GenKey hydrogen fuel cell energy solutions to 30 more sites in North America over the next three years. Ten of these sites were contracted and scheduled to be finished by the end of 2017.

Source: Investopedia

8. Durect, Corp. (DRRX)

Durect, Corp., a biopharmaceutical company developing therapeutics based on its epigenetic regulator program and proprietary drug delivery platforms, posted an all-time low of 61 cents in November 2012 before embarking on an uptrend that topped out at $3.42 in June 2015. A subsequent decline unfolded in multiple waves, ending at a 2-year low in April 2017 followed by a recovery that stalled at resistance near $2.00 in July.

The stock has since recovered, finding support at the 50-day EMA and challenging the second quarter high.

In mid October, the company reported that Persist, the Phase 3 clinical trial for its Posimir pharmaceutical, did not meet its primary efficacy endpoint of reduction in pain on movement over the first 48 hours after surgery as compared to standard bupivacaine HCl. While results trended in favor of Posimir versus the comparator, they did not achieve statistical significance. Posimir is an investigational drug candidate being developed for the treatment of post-surgical pain.

Posimir is an investigational extended-release depot utilizing Durect’s patented Saber technology intended to continuously deliver bupivacaine to the surgical site for 72 hours to provide up to three days of continuous pain relief after surgery. Posimir is a drug candidate under development and has not been approved for commercialization by the U.S. Food and Drug Administration or other health authorities.

Source: Investopedia

9. Microvision, Inc. (MVIS)

Microvision, Inc., a provider of ultra-miniature projection display and sensing technology, topped out at a split-adjusted $548 in 2000 before entering a downtrend that continued into a 2012 low at $1.11.

A 2013 bounce to $3.49 carved posted resistance, ahead of multiple reversals that have outlined a rectangular basing pattern. The stock rebounded in October 2016, entering an uptrend that’s has reached the upper half of its persistent trading range. The stock broke out to a 22-month high in September and has since settled near $2.75, signaling an upside that could reach the 2015 high at $4.23.

The company announced in August that it sold 1.5 million unregistered shares to a private investor who is also a current shareholder at a price of $2.10 per share, for aggregate consideration of $3.15 million. Microvision intends to use the proceeds from the issuance for general corporate purposes.

Microvision’s display and sensing solution can be adapted to an array of applications and form factors. MicroVision’s business model and product line offering includes display and sensing engines, licensing its patented technology and selling components to licensees for incorporation into their scanning engines.

In September, Microvision and WPG Holdings, a distributor of semiconductor components in Asia, entered into an agreement for distribution of Microvision’s line of PicoP scanning engines across Asia.

Source: Investopedia

10. BioDelivery Science International, Inc. (BDSI)

BioDelivery Science International, Inc., a pharmaceutical company with a focus on pain management, broke above 7-year resistance at $8.26 in 2014, then rallied to an all-time high at $18.48 a few months later. A pullback into 2015 triggered a failed breakout, delivering a decline that continued into a November 4-year low at $1.50.

The stock tested that level in April 2017 and turned higher, supporting an uptrend to a 52-week high at $3.60 in July. The stock fell in September, finding support at the 200-day EMA. It could bounce back to the third quarter high.

The company announced in September that Health Canada granted market authorization to formally transfer the Drug Identification Number (DIN) ownership of Belbuca (buprenorphine) buccal film in Canada to BDSI’s commercial partner, Purdue Pharma in Canada. This approval triggers a milestone payment to BDSI.

Belbua incorporates BDSI’s BioErodible MucoAdhesive (BEMA) drug delivery technology and is the only long-acting opioid that uses buccal film technology to deliver buprenorphine for patients living with chronic pain. Belbuca was approved in Canada in June 2017 for the management of pain severe enough to require daily, continuous, long-term treatment and that is opioid-responsive and for which alternative options are inadequate.

Technology and biotechnology highlight October’s penny stock list while the recent Russell-2000 breakout should benefit an assortment of low-priced stocks in the fourth quarter. Nevertheless, this group remains speculative, requiring aggressive risk management.

Penny stocks require investors to make some guesses about the future. Very few such stocks have a sufficient track record to indicate they will prosper. At the same time, the stocks on this list are in significant industries and have the potential to be vital players in their industries.

Featured image courtesy of Shutterstock.

 

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.9 stars on average, based on 8 rated postsLester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.




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Analysis

Investors Getting High on Cannabis

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

A year ago, you would hardly find even the most financially illiterate person in the world that had not heard of Bitcoin or cryptocurrency. Regardless of whether they know what it was — at least they know you can earn money with it!

Opportunities to earn easy money sometimes do appear, but they do extremely rarely, and in this light the crypto boom is often compared to the tulipmania that happened in the 17th century. At that time, speculators with no experience joined the tulip futures trading, which eventually led to a sharp increase in flower bulb prices, while a year later the overheated market collapsed, bringing huge losses to all.

The chance to earn huge profits for people who do not have a close connection with the markets does not appear so often. But for those who work with stocks, such opportunities arise almost every quarter.

The price of bitcoin at the peak of its popularity, when almost everyone knew about it, went up by 2,000%. In the stock market, some companies can yield a return of 1,000% within a week or a month, and there is no need to wait a whole year around.

The last sharp increase in share prices after an IPO, which broke all records this year, was shown by Tilray. Since the IPO on July 19 this year, the stock yielded a return of 1,300% over 2 months, and for those who follow the IPO, there was plenty of time to buy this stock, as the price was at about $20 for about a month.

Tilray is a Canada-based company specializing in cultivation and sale of medical marijuana to consumers and pharmaceutical distributors.

When a stock experiences such a rise, however, it usually falls afterwards, and Tilray was no exception as it lost 50% of its maximum value, although it continues to trade at 600% higher against the initial IPO price.

2018 was a landmark for marijuana manufacturers, as in January California legalized the use of marijuana for recreational purposes. Currently, medical marijuana products can be consumed in 29 US states. It is expected that, by 2022, the marijuana market in the US and Canada will have grown by more than three times.

Tilray is a clear indicator of investors’ interest in such companies. However, it’s not just traders who are interested in marijuana producers. Constellation Brands, one of the largest beer producers in the US, announced its intention to invest $4B into Canopy Growth, another Canadian company. This will allow it to increase its share in Canopy Growth from 8.70% to 38.00%. In the next 3 years, the US company will get the right to buy another 139.7M shares for $3.5B, thereby increasing its stake to the controlling one.

Meanwhile, Microsoft has partnered with the Kind Financial, a US based startup company which develops software for government agencies that control the production and sale of marijuana.

On September 17, rumor had it that Coca-Cola was negotiating with Aurora Cannabis to create a beverage containing cannabis. Most likely, this drink will be used to reduce inflammation, seizures, and as an anesthetic.

All this confirms the interest of large companies and investors in marijuana manufacturers. At this rate, finding a marijuana company and investing your money in it could seem a good idea, but there is a risk of high volatility, just like in case of Tilray, which can put your deposit under serious threat. An easier way would be investing in an ETF with the same companies stocks.

The most interesting ETF in the marijuana industry is ETFMG Alternative Harvest (NYSE: MJ).

According to some sources, since August 22, this fund recorded a cash inflow of $112M, which is about 20% of the total value of its entire portfolio. With the money supply growing, the trading volumes increased up to 10M shares, which is 3 times higher than the volume in July.

The interest towards this ETF was especially frantic when California passed the law early this year: at that time, ETF MJ price rose from $29 to $39. Then, in March, the price tried to go up further, but the volumes stayed low, so the price had to get back and even sank a bit. It was only in August when $27 got broken out, and then the price went well up to reach $45, this time also with increased trading volumes. Currently, the support levels are at $34 and $39. Given the increased volatility, the price is quite likely to go down to $34.

ETF investment has always been considered less risky, and in case we are now on the brink of a marijuana boom, this ETF is certainly going to be the best investment vehicle.

 

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 7 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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Activism

Stock Pick: Philip Morris

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Philip Morris International Incorporated is an American multinational firm that manufactures cigarettes and tobacco. Its products including its best-seller Marlboro cigarettes that are sold in over 180 countries around the world. The company has a diverse workforce of over 81,000 employees and touts an estimated 150 million consumers worldwide. In 2017, Philip Morris generated 7.8 billion dollars in revenues.

Technical Analysis of Philip Morris (PM)

PM looked toppish in June 2017 when it failed to take out resistance of $120 after two attempts. On top of that, the stock was trading in extreme overbought territory on the weekly chart. These were indications that bulls were exhausted.

Things went from bad to worse when the stock breached support of $110. This activated the head and shoulders reversal pattern on the daily chart and effectively reversed the trend. The downtrend saw PM drop to as low as $76.21 in June 2018. However, it appears that the worst may be over for the stock.

Technical analysis show that PM is respecting key support of $78. Bulls have defended this level since February 2012. It looks like they will continue to take control of this price level, especially after PM successfully backtested the support in August 2018.

In addition, we can see the weekly RSI breakout from its own falling wedge pattern. This is an indication that bulls are significantly gaining momentum.

Fundamental Analysis of Philip Morris (PM)

In addition, we have fundamental analysis to back up our bullish view. PM’s trailing twelve month price to earnings ratio stands at 19.78. The stock is still relatively undervalued considering that it has a five-year maximum of 28.51. This suggests that investors are generally willing to pay more for PM stocks.

On top of that, Zacks reports that Philip Morris beat expert projections for the second quarter of 2018. Analysts estimated that PM would generate revenues of $7.528 million and an earnings per share (EPS) of $1.23. However, PM brought in revenues of $7.726 million and an EPS of $1.41. With these developments, even the Wall Street Journal is overweight on the stock as they published a target price of $93.27.

The strategy is to buy as close to $78 support as possible. If bulls can successfully defend the support, then PM might be able to rally to our target of $95.

The timeline for the target is less than six months.

Weekly PM Chart

Monthly PM Chart

As of this writing, the Philip Morris International Incorporated stock (PM) is trading at 81.93.

Summary of Strategy

Buy: As close to 78 support as possible.

Target: 95

Stop: Close below 76.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.6 stars on average, based on 239 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

NIO Means Tesla Monopoly Ends

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

On Sep 12, NIO made its IPO on the NYSE, which is a very important event for all automotive investors. Founded in 2014 by William Lee, NIO is one of the first companies to compete with Tesla in the premium electric car segment. NIO is based in Shanghai, China, and it already got investment support from such renowned companies as Baidu, Lenovo, Temasek, Tencent, Sequoia, and others.

There are currently over 4,000 employees at NIO.

In June 2018, the company started selling NIO ES8; currently, 481 electric cars have been sold and 17,000 more have been pre-ordered. This is Tesla Model X’s direct competition, while its price is twice as low thanks to some good support from the Chinese government, which is interested in promoting electric cars.

NIO ES8 starts from $67,000 (basic configuration). It has two engines of 635 horsepowers and can ride 355 km before charging. A good difference from Tesla is an option to use replaceable batteries; the monthly subscription is $193, and it takes just around 3 minutes to replace a battery. Tesla planned to offer this option, too, but did not implement it.

The underwriters of NIO at NYSE were BofA Merrill Lynch, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley, and UBS. The initial price per share was $6.26. During the first day, 160M of shares were sold, which allowed NIO to get around $1B and get a place in top US IPO’s rating in 2018.

During the first day, the share price increased to $7, while the next day it jumped above $13, allowing investors to make over 100% profit. This shows investors are very much interested in the company, perhaps because of the good pre-IPO promotion. Before buying NIO shares now, though, one should wait first for the volatility to calm down.

Comparing Tesla and NIO is not the best job now, as Tesla already has over 14-year experience; however, this comparison may well become valid in a year or two, when more data arrive. While NIO is just starting out, its management may make accidental mistakes.

The lockup period (the period during which investors are not allowed to sell their shares) is 180d, which may additionally support the price, while after that the Q2 results will come out. Among NIO’s advantages, one may name government support as one of the biggest. While the trade war between the US and China is here to stay, the demand is high, and company may cater to Chinese customers first. When it starts conquering the US market, though, the conflict may have already come to an end. The company also admits that the customs duties may indirectly influence the car prices.

The issues NIO might face are already known, and the most obvious one is that of meeting the demand. Over the first 6 months of 2018, NIO had a loss of $502M, while the profit earned afterwards is currently just $7M.

Another risk is in the news that Tesla has come to an agreement with Shanghai authorities to build a car factory in the city, which means high competition for NIO. Still, NIO is likely to win thanks to the price, as the parts for Tesla are produced in the US only, and they are subject to customs duties.

NIO management also announced they had had no mass electric car production experience before, and this may have negative influence on the company growth – an issue already overcome by Tesla. Finally, for ES8, there are around 1,700 used coming from 160 vendors; with so many suppliers, delays in shipments may become quite a common thing.

Many things depend on how NIO is going to rise its production volume and how true the declarations of the management are. Previously, we’ve seen how Elon Musk’s words were sometimes very different from what happened in fact.

One of the key topics here is financing, as the development will require a lot of money. Even Tesla has failed to book net profits so far, its losses and debts still growing.

NIO shares are likely to rise in the short term, as investors will be playing on the fact the company is quite promising at first sight. Other conclusions may be only made after there are at least some financial data at hand.

Technically, there are two support levels for NIO: one at $7 and another at $9.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 7 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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