NIO (NYSE:NIO) stock has been on an absolute tear in the past 2 months.
When I last wrote about its shares on May 28, NIO was trading at $3.83. Shares currently sit at $14.98. That represents a price appreciation of 291% in a very short period of time.
Back in May, I recommended NIO as a buy despite negative rhetoric and trade war concerns. Chinese government control via direct investment and sheer market size alone made it fail-proof in my mind then.
Markets will be paying much more attention to NIO given its meteoric rise of late. Investors will likely engage in profit taking to some degree but I believe NIO shares’ trajectory makes it a buy still.
There’s still plenty of room for long-term buy-and-hold investors to get in profitably.
Nio Stock Profits Will Be Booked
Investors are keenly aware of Nio’s price increase of late. Investors who jumped into Nio shares on a whim a few months ago have made large profits, and they’re going to look to turn those paper profits into cold, hard cash. Thus, markets can expect to see some selling in order to book profits. Naturally, if enough investors decide to do so, prices will respond in kind.
Market viewers can expect that a price dip could occur for no other reason than profit booking alone. Therefore, investors keen to pick up NIO’s shares on a dip absent any fundamentally negative news should be on the look out. Impatient profit booking can be a great opportunity for long-term investors.
NIO is No Exception to the Rule
Sales drive companies. Even the most over-hyped companies have to face this truth at some point in their respective lives.
This is not to imply that NIO was over-hyped, but rather to say that NIO is succeeding exactly where it needs to. NIO has shown excellent sales trajectory in the past, and 2020 has been stellar.
“NIO delivered 3,740 vehicles in June 2020, representing a strong 179.1% growth year-over-year. The deliveries consisted of 2,476 ES6s, the Company’s 5-seater high-performance premium smart electric SUV, and 1,264 ES8s, the Company’s 7-seater high-performance premium smart electric SUV, and its 6-seater variant. NIO delivered 10,331 vehicles in the second quarter of 2020, representing an increase of 190.8% year-over-year and an increase of 169.2% quarter-over-quarter. As of June 30, 2020, cumulative deliveries of the ES8 and the ES6 reached 46,082 vehicles, of which 14,169 were delivered in 2020.”
Electric Cars Are Proving Their Staying Power
Narratives surrounding electric cars have run the gamut over the past decade. Market opinions ranged from electric vehicles having no potential at all to them being the end of ICE vehicles.
Consumer behavior has reached critical mass and electric vehicles are part of a new normal in the automobile industry. Tesla (NASDAQ:TSLA) has moved past its growing pains and has proven it can produce strong results operationally and financially. It is the most valuable automobile company in the world.
Investors are going to continue to reward electric vehicle stocks whether they prefer to drive ICE vehicles or not. Tesla will continue to garner the most attention, and rightfully so. But markets are paying a lot of attention to electric car stocks in hopes that the next Tesla reveals itself. NIO may be that company.
Nikola (NASDAQ:NKLA) is a very interesting stock, and company as well. And there are many other interesting vehicles and projects coming from companies including Rivian, Bollinger Motors, Workhorse (NASDAQ:WKHS) and Lucid Motors just to name a few.
Are NIO Shares Still a Buy?
It all looks positive for NIO shares, and I believe they are a buy. One caveat is that trade war concerns do persist. Current legislature moving through Washington has the potential to seriously drop NIO’s value and that of Chinese stocks across the board.
I am of the opinion that there is a need for more oversight of Chinese companies that want to list shares on U.S. exchanges. That said, I hardly believe that every Chinese firm is like Luckin Coffee (OTCMKTS:LKNCY). And Nio’s fundamentals suggest there is more room for this stock to run up the charts.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.