On July 6, I warned that it was definitely time to take profits on your Nio (NYSE:NIO) shares. Exactly a week later, I sardonically congratulated the Robinhood crowd for sending Nio stock into bubble territory.
Was I too early in advising that people take profits on Nio stock? Of course! No investor consistently sells his or her shares at the exact top. For goodness’ sake, please don’t listen to anyone who says that he or she buys or sells stocks at the perfect time.
This is not to say that Nio isn’t a good growth-oriented company. If anything, Nio stock still has plenty of room to run, but that’s on a very long-term time horizon. Plus, this comes with an added disclaimer that Nio is a relatively small, speculative electric-vehicle company.
With that in mind, Nio is still worth owning but perhaps not at the current price point. The company is going in the right direction, but the stock itself might not be.
A Closer Look at Nio Stock
So again, I advised on the 6th of July that it’s time to sell your shares of Nio stock if you already owned them. At that time, the share price was $11.51.
The stock price then proceeded to run up to a 52-week high of $16.44. So, if someone took my advice, he or she would have left quite a bit of money (percentage-wise, at least) on the proverbial table.
Also consider, however, that the 52-week low for Nio stock is $1.19. If you had purchased the stock at $2, $3 or even $5, you would have profited handsomely by selling at $11.51.
After peaking at $16.44 on July 10, four days after my profit-taking recommendation, the share price commenced a quick descent. As of July 24, the stock was valued at $11.82. The market has evidently decided that Nio stock isn’t yet ready to be priced above $16. However, it still might be worth that much someday.
Big Sales for a Small Company
When it comes to automobile sales (and pretty much everything else in life), we should measure them on a comparative basis. For instance, if a giant automaker like General Motors (NYSE:GM) only sold several thousand cars in the month of June, that would be considered disastrous even during a global pandemic.
Relatively speaking, however, delivering several thousand cars in a month is quite an accomplishment for a smaller automaker like Nio. Thus, when Nio announced that it had delivered 3,740 vehicles in the month of June, this was front-page news for the company.
That number of vehicle deliveries marked a monthly record for Nio. Not only that, but it signified a 179% increase compared to the same month of the prior year.
Nio Is a Growth Story
When we put all of this into perspective, we can truly appreciate Nio’s growth and improvement. It’s almost hard to remember now that during the first quarter of 2020, some folks on social media were concerned that Nio would go out of business at some point.
The second quarter put those concerns to rest. During that time, Nio delivered 10,331 vehicles. That’s 191% more vehicles than the company had delivered in 2019’s second quarter.
If Nio CFO Steven Feng indulged in a little bit of boasting, then, could we really blame him? In particular, Feng commented that Nio’s “deliveries in the second quarter of 2020 exceeded the high end of our earlier projection” and that the company is “confident that our goals on gross margin and operational efficiency will be achieved.”
The Bottom Line
Feng’s confidence is well-earned as Nio is growing by leaps and bounds. However, this doesn’t mean that you need to jump into the Nio stock trade today. If it pulls back to a lower price point such as $7 or $8, feel free to purchase some shares of this overpriced overachiever.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
