It has been a month since I last wrote about electric-powered car company Nio (NYSE:NIO). In that piece, I suggested that Nio stock was affordable and is worth your consideration because it has strong growth potential.
Let’s see how we did, shall we?
Nio stock has been on a steady march higher since those prophetic (and profitable) words were written. Share prices have gone from $6.30 to nearly $16, for a nifty return of 156% in a single month.
Nio has some serious tailwinds right now and it doesn’t take a fortune teller to see them. The electric vehicle market is hot thanks to Tesla (NASDAQ:TLSA), which is up more than 300% so far this year and on its way to being the biggest automotive company in the world.
And Nio, which is known as the “Tesla of China,” has managed to put some of its earlier problems in the rear view mirror. It has gotten past battery and production problems that plagued Nio stock since its initial public offering.
Now the stock appears ready for a sustained drive higher. And there’s still plenty of time for investors to get in at a low price.
Nio Delivers the Goods
In May, Nio reported delivering 3,436 vehicles, which represented year-over-year growth of 215%.
Not surprisingly, there was a lot of interest to see if Nio could duplicate that feat in June, or even exceed it. If you were betting on Nio, you weren’t disappointed. CEO William Li has the good news:
In June, we achieved a historical high of monthly deliveries, contributing to our best quarterly performance. We appreciate the continuous support from our growing and loyal user community. “We are proud of our team for their strong execution from production to delivery. We remain committed to offering the best premium smart electric vehicles and the best user experience to our users.
In total, Nio delivered 3,740 vehicles in June, which represents 179.1% year-over-year growth. For the second quarter, the company says it delivered 10,331 vehicles, which is an increase of 190.8% on a year-over-year basis.
Quarter-over-quarter growth was up 169.2%, which also exceeded Nio’s own forecast for the quarter, which was for 10,000 cars and 158% quarter-over-quarter growth.
Major Headwinds for NIO Stock
Nio is taking off as global interest in electric vehicles continues to grow. Cairn Energy Research Advisors suggests that electric vehicle sales will surge in 2021, driven in part by various nations’ initiatives encouraging people to buy battery-powered automobiles.
Globally, the electric vehicle market is expected to reach $803 billion by 2027.
Nio couldn’t ask for a better partner than Beijing in that regard. China had planned to end its subsidies for new electric vehicle purchases this year, but now it’s been extended to 2022.
As the subsidy isn’t expected to extend to foreign companies like Tesla – China is always extremely supportive of home-grown businesses – Nio will likely be the biggest beneficiary with a huge advantage in China, which has one of the best economies in the world.
Nio already has 92 spaces in 76 cities in China, along 22 of its Nio Houses that promotes lifestyle choices the company believes caters to Nio owners.
Make no doubt about it – Nio is selling much more than a vehicle. It’s promoting a lifestyle that is designed to instill exclusivity and brand loyalty that will help the brand expand down the road.
The Bottom Line for Nio Stock
Nio is putting its production problems behind it and is building a track record of exceeding its production goals. The company is also taking dramatic steps toward profitability, improving from gross margins of -15% a year ago to -7% in the last quarter.
While you can’t expect 139% returns every month, Nio stock is a strong growth play and should continue its upward trajectory. Nio has an “A” grade and a strong buy recommendation right now in my Portfolio Grader.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.