TOP 3 stocks for September 2023

When will Tesla pull the ace out of its sleeve?

Tesla shares have long been one of the most traded among Purple Trading clients, and given their high volatility, it's no wonder. Since the beginning of the year, Tesla stock has gained more than 140% but has fallen 5% in the past month. The overall market sentiment is mainly to blame, as well as the published number of cars delivered in Q3. But let's slow down and go over the Tesla stock analysis one step at a time.

The prospect of appreciably higher interest rates in the US for a prolonged period of time has caused a significant sell-off in the US markets and the overall mood can be described as very negative. This is certainly not good news for technology stocks, which have strengthened so substantially over the course of the year. In addition, demand for more premium products, which Tesla cars undoubtedly are, could wane.

In addition, the US dollar has also started to strengthen significantly, which is negative for all export-oriented companies. Tesla generates about half of its total sales outside the US market. The strong dollar may already have a negative impact on Tesla's upcoming earnings, which it is expected to report on 18 October. This date is therefore definitely worth remembering, as we can expect further significant volatility in Tesla shares thereafter.

_{Tesla shares on D1 timeframe in MT4 platform}

Tesla has traditionally announced the number of cars delivered in the previous quarter, and it wasn't a very positive number. During the quarter, Tesla delivered just over 435,000 new cars, but the market was expecting a much higher number - around 466,000. Deliveries even fell by 7% quarter-on-quarter.

The markets were not impressed by the total production numbers either, with Tesla reporting a figure of around 430,000 and the market expecting almost 480,000. Both numbers fell well short of expectations, Tesla is clearly struggling with falling demand, which is quite understandable at the current level of interest rates. However, the stock's loss of just 5% over the past month may still be quite optimistic, and further selloffs may be imminent during earnings.

Tesla is responding to the situation by further reducing the prices of Model 3 and Y cars in the US. This is already the fifth price cut this year. Margins, which are one of the most important indicators for earnings, are likely to suffer significantly. However, there are positives - Tesla is still growing. The number of cars delivered rose by 70,000 year-on-year despite some factory closures during the last quarter. Moreover, these cars will bring many improvements. Tesla still plans to deliver 1.8 million new cars this year and has one more ace up its sleeve - the Cybertruck. First deliveries of the new model could start as early as late October/November, which could boost Tesla stock.

NIO - opportunity or risk?

Back in July, we could have described Nio's stock development as similarly brilliant to that of rival Tesla. They have appreciated by more than 60% since the beginning of the year, and NIO shares are currently trading even lower than at the beginning of the year. What was behind the similar washout? And are NIO shares a good opportunity or an unnecessary risk?

While Nio is one of China's most popular EV manufacturers among investors, the current negative market sentiment has had a significant impact on the company's valuation. It's not just Nio, American Lucid has also undergone a significant sell-off and the share price has already plunged to $5. Chinese stocks, however, have undergone significant sell-offs due to the situation in the domestic market. Chinese demand is still weak, the country even fell into deflation for a while. Stimulus packages are not yet working very well and luxury car companies may suffer further. Nio also failed to please its investors by extracting USD 1 billion of new capital through the issuance of new bonds that carry an interest rate of almost 5%. Nio is reportedly considering another round of convertible bond issuance.

_{Nio shares on D1 timeframe in MT4 platform}

However, the trigger for the selloff was also the second-quarter economic results, which showed a massive loss. The company is expected to release its third-quarter results on November 9, and we again expect further volatility. In the short term, Nio stock may suffer further and further downside is not ruled out.

In the longer term, however, Nio may be an interesting investment opportunity. In the Chinese market, it is the clear leader in the premium EV segment - in July, Nio's market share was 59%. Moreover, the company expects significant margin growth in the coming quarters, as well as the number of vehicles delivered. Margins could rise from 1% in Q2 to double-digits already in Q3 and the number of cars delivered could stabilize above 20,000 in Q4. However, the given expectations are quite high, and failure to meet them could send Nio shares even lower. However, Nio could also lure further investment from funds or other carmakers.

This year, an Abu Dhabi fund has already invested $740 million in Nio, and Volkswagen, for example, has invested in rival Xpeng. The high cost of developing electric vehicles is forcing individual carmakers to invest in competitors, and Nio could benefit from that. In the short term, however, we expect significant volatility.

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