If October was a good trick-or-treat month for Chinese electric-vehicle manufacturer Nio (NYSE:NIO) — and it was — then November is an even more enjoyable feast. Shares of Nio stock surged more than 60% as the innovative automaker rode its momentum and set the stage for the company to have a new year of growth and promise.
For investors, there’s still a lot to like about the company.
As Nio stock recently posted new highs, I’m sure it is tempting for some investors to sell and pocket some profits at this time. But waiting has the potential to be valuable. Why? Because the company’s performance indicates even better days are ahead and patient investors stand to receive even more rewards. Patience is a virtue for investors. They tend to fare better than frantic in-and-out speculators.
2020’s Been Good for Nio Stock
A little more than 12 months ago, shares of Nio stock languished at $1.36. Oh, the difference a year can make. Currently, the company is trading around $49, a level helped reached, in part, by the EV maker’s Nov. 17 third-quarter earnings report.
That announcement revealed that Nio delivered 12,206 vehicles in the three months ended Sept. 30. This was a hefty increase over the 4,799 vehicles it delivered during the same period in 2019, and the output topped the 10,331 vehicles delivered in the previous quarter. In addition, Nio said that adding in October’s output, the company has delivered 31,430 this year and a total of 63,343 overall.
Nio also said it booked revenue of $666.6 million in Q3, which surpassed forecasts of $655 million. This odd-looking figure marked a 146% increase year-over-year and was 21.7% more than revenue recorded in the second quarter.
The quarterly report also showed the company is edging toward profitability. The adjusted net loss for Q3 was $147 million, which was an 11.8% decrease from Q2 and a whopping 59% decrease from the third quarter of 2019. Losses per share were 14 cents, compared to 35 cents a share in 2019.
Q3’s report was a strong one for the former penny stock.
InvestorPlace’s Sarah Smith posted an excellent summary of Nio’s third-quarter report. “All in all, it appeared to be the best quarterly report yet for Nio stock,” she says.
Besides posting an encouraging third quarter, Nio reiterated the release of its new 100 kilowatt-hour battery. The battery is an improvement over its 70 kWh battery and will be offered to consumers who decide to upgrade. As might be expected, the new battery provides vehicle owners with more range and power. There also is speculation that the company is poised to offer a 150 kWh battery in the near future.
Since batteries are the power source while the vehicle is in use, improvements are a necessity for electric vehicles to become mainstream modes of transportation. Nio’s battery-as-a-service system is a terrific option that should be implemented in the United States.
The program allows customers to lease batteries and drive into service centers for a quick replacement of a nearly depleted battery with one that is fully charged. This takes just a few minutes, the company says, and strikes me as an experience comparable with stopping at a gasoline station. Customers can pick a lease program that fit their needs. This approach is a nice compliment to the charging stations being developed for electric vehicles.
The Bottom Line on Nio
Nio is a China-based maker of stylish electric vehicles — autos and SUVs. The vehicles are targeted at the premium market that is blossoming in that nation. While Nio does not sell its vehicles outside China, it doesn’t take much imagination to see the potential to expand on its domestic success.
Looking back, 2020 was a whiplash year for the company, which nearly failed and received government support to get through the rough patch.
Looking ahead, there is much potential for Nio to thrive. One factor in this is the company’s efforts to build a relationship with its customers. The result is something I would compare to the loyalty demonstrated by fans of Apple (NASDAQ:AAPL) products.
Nio is a buy-and-hold stock, even at current prices, though a dip would be an attractive opportunity.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.