The NIO (NYSE:NIO) share price has had a fairly rough start to 2021. Despite experiencing a massive 1,400% surge during 2020, the EV stock has since been on a downward trajectory, falling from $57 to around $40 today. That’s a 30% decline in a relatively short space of time.

What caused this sudden drop? And is this a buying opportunity for my portfolio?

NIO’s falling share price

I’ve previously discussed NIO’s share price back in February. The initial decline started as part of the general market pull-back from growth stocks, from what I could tell. But since then, the company released its full-year results for 2020.

In the last three months of 2020, NIO successfully delivered 17,353 vehicles – a 111% increased compared to a year prior. And over the entire year, 43,728 vehicles were delivered. Combined, this led to total sales expanding to around $2.5bn while simultaneously reducing net losses by approximately 52%.

Needless to say, it was a pretty impressive earnings report. At least, that’s my opinion. So why did the share price fall? Like many tech companies, the current shortage of semi-conductors appears to be taking its toll. NIO has announced it will temporarily suspend vehicle production in its JAC-NIO manufacturing plant for five days due to supply constraints.

Five days may not seem like a lot. But it’s enough for the management team to lower guidance on its total Q1 2021 vehicle production forecasts. And so, NIO now expects a total of 19,500 vehicles to be delivered instead of the original 20,000 – 25,000 delivery estimates. As a result, the NIO share price has taken a bit of a hit.

Is this a buying opportunity?

Following the recent decline in share price, NIO now trades at a market capitalisation of around $62bn. Based on analyst forecasts, total revenue for 2021 is expected to be about $5.23bn. Therefore its price to sales (P/S) ratio is now around 11.8. Compared to its P/S ratio of 15.7 when I last looked at the stock, this valuation does look more sensible.

However, it is by no means cheap. The current share price still places a high $1.41m value per car delivered in 2020. To me, this suggests, the NIO share price is still being propped up by significant shareholder expectations, which could lead to a further decline if the firm fails to meet those expectations.

In fact this is exactly what has happened with the aforementioned suspension of vehicle manufacturing.

The bottom line

NIO continues to look like a fantastic growing business within the electric vehicle space. And while the semi-conductor shortage is causing some disruptions, this is ultimately a short-term problem.

But as much as I would want to add this stock to my portfolio, the company continues to look too expensive for my tastes.

However, there is another high growth stock that caught my attention…