The Top Reasons Nio Could Race to Higher Highs

With the pedal to the metal, shares of Nio (NYSE:NIO) are racing. When I last weighed in on the NIO stock, I said the stock “could break to $17, near-term. All as it still continues to produce solid monthly numbers.”

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That was on Aug. 24, as the electric vehicle stock traded at just $14.31.

However, it did more than break to $17, it crushed that target and raced to a recent high of $27.87. If its sales can continue to accelerate from here, $40 isn’t out of the question.

Things have changed for the better for the EV company. With solid monthly growth and earnings, coupled with higher demand for electric vehicles, I believe the NIO stock could bolt. I also expect to see further upside once its next delivery numbers are released.

Monthly Deliveries are Flying Up the Road

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.

But things have changed a lot since then, as sales explode higher.

  • For September, Nio delivered 4,708 vehicles, growth of 133% year over year. And it announced it delivered 12,206 vehicles in the third quarter of 2020 – an increase of 154.3% year-over-year.
  • In Aug., Nio delivered 3,965 EVs, which was a 104% improvement year over year. Cumulative deliveries at the time were up to 21,667 for the year, an increase of nearly 110% year over year.
  • In July, EV sales were up 322% to 3,533 vehicles.
  • In June, it delivered 3,740 EVs, which was up nearly 180% year over year.

In its third quarter, the company delivered a total of 12,206 vehicles – a 154.3% year over year jump. It’s also above company guidance.

In short, the EV company has turned a major corner after its “substantial doubts.”

Helping Quite a Bit, the EV Boom isn’t Slowing

For one, there’s a global push for greater EV adoption around the world.

In the U.S. for example, California Gov. Gavin Newsom signed an executive order that bans the sale of gasoline-powered passenger cars in the state starting in 2035. That means only EVs will be available for purchase in 15 years.

And, according to the Boston Consulting Group, EVs could account for a third of all auto sales over the next five years. Better, major automakers like General Motors (NYSE:GM) are increasing their investment in electric vehicles. In fact, General Motors just announced it is investing $2.2 billion in U.S. manufacturing to increase EV production. According to CNBC contributor Michael Wayland:

“Since March 2019, GM has committed to invest more than $4.5 billion in three U.S. manufacturing sites to prepare for EV-related production. The company has previously said it plans to release at least 20 new electric vehicles globally by 2023, including the upcoming GMC Hummer EV.”

Analysts Seem to Love the Nio Stock

J.P. Morgan analyst Nick Lai, for example, just upgraded NIO stock to a “buy” from a “hold,” taking his target to $40 a share. Lai believes China’s EV penetration could quadruple by 2025, “meaning that about 20% of all new cars sold in China would be battery powered,” as noted by Barron’s contributor Al Root.

If Nio can produce blow-out earnings by November, and even better deliveries, $40 may be a low-ball target for this stock.

Again, things have changed for the better for the EV company. With solid monthly growth and earnings, coupled with higher demand for electric vehicles, I believe NIO stock could bolt. I also expect to see further upside once its next delivery numbers are released.

On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999.


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