When I last weighed in on Nio (NYSE:NIO), I said, “While a good deal of optimism has been priced in, we could see further upside. That is, if the company can continue its string of solid monthly delivery numbers.”
That was on July 23, as the NIO stock traded at a low of $11.85.
Nowadays, the NIO stock is consolidating around $13, and could break to $17, near-term. All as it still continues to produce solid monthly numbers.
Helping, Wedbush analyst Daniel Ives recently noted:
“We continue to believe [electric vehicle] demand in China is starting to accelerate in July/August with Tesla (NASDAQ:TSLA) competing with a number of domestic and international competitors for market share with Giga 3 remaining the linchpin of success which remains the prize that [Chief Executive Elon] Musk and Tesla are laser focused on capturing.”
That same “accelerating” demand is also driving further upside for NIO.
NIO Monthly Deliveries are Only Improving
For quite some time, it appeared NIO wasn’t going to survive. Not only did the coronavirus crush electric vehicle demand at one point, the company even said there was “substantial doubt” in its ability to continue as a going concern.
“Its cash balance of $151.7 million as of Dec. 31 is not adequate to provide the required working capital and liquidity for continuous operation,” the company said.
Shortly after, NIO turned a major corner with game-changing delivery reports.
NIO Deliveries Soared 322% in July 2020
For July, NIO posted deliveries that were 322% higher year over year. Its two models – the ES6 and the ES8 – had combined deliveries of 3,533. William Bin Li, founder, chairman and CEO of NIO, said:
“In July, we are pleased to have achieved the second-highest monthly delivery results despite the impact on productions due to a 5-day suspension of manufacturing to prepare for EC6 productions and other flood-related supply chain challenges.”
“More proudly, we have achieved a record-high monthly order growth, attributed to a stronger demand of the ES8 and ES6, together with the increasing EC6 orders.”
In June 2020, Nio delivered 3,740 vehicles, up nearly 180% year over year. That included 2,476 E6 SUVs and 1,264 of its ES8 models.
For May 2020, it delivered 3,436 vehicles, including the delivery of 2,685 ES6 models.
For April 2020, deliveries were up to 3,155 for the month, a growth rate of 181% year over year, and 106% month over month. Better, for the second quarter of 2020, NIO delivered 10,331 vehicles, an increase of 191% year over year.
Nio’s Second Quarter Report Was Also Solid
Deliveries of vehicles jumped to 10,331 in the second quarter of 2020. That included 8,068 ES6s and 2,263 ES8s, compared with 3,553 vehicles delivered in the second quarter of 2019 and 3,838 vehicles delivered in the first quarter of 2020, as noted by the company.
Sales came in at $493.3 million, which was nearly 140% higher year over year. Vehicle margin came in at 9.7%, as compared to a negative 24.1% in the second quarter of 2019.
At the same time, it did lose $160 million in the second quarter of 2020. However, that’s 64.6% less than year ago numbers, and 38.1% lower than the first quarter of this year. According to the company’s earnings statement:
“We achieved a record-high quarterly deliveries of 10,331 ES8 and ES6 vehicles in total in the second quarter of 2020 and expect to deliver 11,000 to 11,500 vehicles in the third quarter as the momentum continues.”
“The current constraints on the productions will be lifted in the near future and we are confident that our production capacity can meet the accelerated demand of our models.”
The Bottom Line on NIO Stock
Things have changed for the better for the car maker. With solid monthly growth and earnings, coupled with higher demand for electric vehicles, I believe the NIO stock could test $20, near-term. I also expect to see further upside once August deliveries are announced.
While I was bearish on NIO in the past, I’m now convinced the shares could see higher highs.
Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
