Investors have reasons aplenty to get bullish on the electric vehicle sector these days, what with the magnificent comeback of Tesla (NASDAQ:TSLA) and the steady climb of Workhorse Group (NASDAQ:WKHS). But while those companies make their vehicles in the good ol’ U.S.A., a rising star in China is also making waves on Wall Street, Nio (NYSE:NIO). And if you own NIO stock, good news: Your tank is filling up fast.
As in up 526% year-over-year fast.
The company has excited investment pundits for so long, the “Tesla of China” label is beginning to feel like an old peeling bumper sticker. But if the sticker sticks, then stick it to the doom-and-gloomers. Trading around $19.30 per share, NIO stock may not reflect a company profit as yet. That noted, all signs point to a robust path to scale where the automaker continues to sell more and more vehicles.
As reflected in the second-quarter earnings report of its fiscal year, Nio delivered 10,331 of its ES6 and ES8 vehicles, which set a company quarterly record. And Nio announced that it expects to deliver between 11,000 and 11,500 in the third quarter. That will bring revenue between $572.9 million and $596.2 million.
Sidestepping the China-U.S. Trade War Factor
We can look at NIO stock and see, as I do, a success story in the making. That said, even if you’d made every attempt to ignore the news – fake, real or otherwise – you’d still get that China and the U.S. are locked in some intense trade and commerce disputes. And as a result, some mighty Chinese companies have paid a heavy price.
Not that long ago, the privately held Huawei was the undisputed leader in emerging 5G telecom technology. But amid accusations of intended espionage, Huawei was dealt what a geotechnology expert called “a lethal blow” by the U.S. government. The Commerce Department announced in August that it would cut off “Huawei’s access to vital, advanced computer chips essential to its cell phone technology.”
Then there’s TikTok, the Chinese video-sharing social networking service. Even after Oracle (NYSE:ORCL) apparently won the race to become its technology partner, TikTok continues to raise security concerns among Republican senators who may work to quash the deal, according to The New York Times. For while Oracle would work with TikTok, the company ownership would remain based in China, which upsets some lawmakers.
A Home Nation Advantage
Lesson to remember: It’s simply a bad time to be a Chinese company trying or hoping to do business in America. Nor are companies based in the communist nation nearly as transparent to investors as those elsewhere. Yet the NIO stock rally looks like the real thing and the company need not sell so much as a hubcap here.
Simply put, Nio has plenty and plenty of open road in its home country.
And that home field advantage cannot be discounted, no matter how tense things get between Washington and Beijing. My InvestorPlace colleague Patrick Sanders rightly points out that China has one of the biggest electric vehicle markets in the world.
And with China subsidizing new electric vehicle purchases through at least 2022, NIO stock stands to benefit from a revenue boost afforded by marketplace support.
So Far, NIO Stock Passes the Tesla Test
As for whether Nio is on track to hit its upcoming revenue and vehicle delivery targets, we’ll have to wait until Jan. 4, 2021. That’s the tentative date of its next earnings report. I don’t think you’ll want to wait that long to get in, though, on owning a piece of this Tesla of China.
Witness the Tesla of America (a.k.a. Tesla), where investors who waited out quarter after quarter of losses finally saw daylight and a massive monetary reward for their faith.
Granted, there have been some rotten eggs in the EV basket. The very recent fraud allegations surrounding electric truck maker Nikola Corp. (NASDAQ:NKLA), have triggered inquiries by the Justice Department and Securities and Exchange Commission.
But that’s an exception, not the rule. As a proponent of always viewing a stock in the context of its sector, I contend that the case for electric vehicles is about as strong as it gets. They’re popular, eco-friendly, sustainable and coming at a point when consumers and the planet need them most.
It’s green technology. It’s a green light. Ready, Nio investors and hopeful NIO stock owners, to grab some green? On your mark … get Tesla set …
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.