Niu Technologies (NASDAQ:NIU), a Chinese electric scooter maker, has several factors in its favor that are paying off. Likewise, patience is now paying off for investors. Until recently, NIU stock had been relatively flat from when it was first listed. Now it’s up 243% year-to-date (YTD).
But what is it exactly that’s spurring along Niu? Well, electric scooters have become more popular in recent years for a couple of reasons.
For one, they reduce pollution as an alternative to gas-guzzling cars. They also cut down on traffic congestion in cities. And this year has seen another surge in popularity, with riders wary of public transit during the pandemic.
Because of these tailwinds, the stock has earned an “A” rating in my Portfolio Grader. Right now, the company’s focus on selling scooters instead of renting is paying off as the demand for affordable, non-polluting, non-shared transportation heats up.
NIU Stock Has the Timing Right
We’ve already seen electric vehicle (EV) stocks take off in 2020. EVs have become more practical for more people, with better technology and longer ranges. At the same time, fossil fuels are being increasingly recognized as a major contributor to climate change. That has put oil companies on the outs and increased demand for EVs.
However, electric cars are still more expensive than most traditional gas-powered vehicles. They also require the professional installation of a pricey home charger. And electric cars don’t do anything about traffic congestion, one of the central problems about urban transportation.
Enter Niu. Electric scooters like Niu’s satisfy the clean operation goal while also alleviating traffic. They are also private to the owner, alleviating concerns about community spread of Covid-19. As a result, the company has been able to capitalize on these intersecting transportation trends.
According to Karan Girotra, a professor of operations, technology and innovation at Cornell University:
“Well-regulated use of e-scooters and e-bikes can significantly improve urban commutes by providing a healthy, fast option for commuters; relieving congestion on roads and easing the pressure on public transit.”
These are undeniably positive factors for NIU stock. Investors need to consider that.
Rental Scooters Are Falling Out of Favor
In recent years, rental scooter companies have been all over the news. Now, though, they are beginning to fall out of favor. In another quote, Girotra sums up the growing concerns about public e-scooters that have popped up recently:
“Shared scooters offered by transportation network companies for by-the-minute rental present further challenges. While more convenient, they also tend to attract riders with limited experience. The strategy of many companies to simply saturate cities with a large number of scooters can lead to poor parking–a lack of regulation here can turn this opportunity into a nightmare.”
Of course, cities were already getting fed up with masses of scooters left lying around after being tossed by riders. Then came the pandemic. While city dwellers looked for alternatives to crowded buses, they also weren’t fond of the idea of hopping on a publicly shared rental scooter either.
As a result, scooter-sharing services have begun to suspend operations in many cities. While unfortunate for those companies, that’s been a big plus for NIU stock.
Third Quarter Showing Momentum
On top of the rental scooter news — as well as the other growing trends we’ve discussed — Niu’s third-quarter earnings reflect the growing popularity of electric scooter ownership. And this is not just the case in China, the company’s home country. Sales are increasing in other countries as well, up over 39% year-over-year (YOY) in China and over 35% in international markets.
In addition, Niu reported sales of spare parts, accessories and services of RMB 94.1 million — the equivalent of roughly $14.4 million. That’s up 20.2% YOY.
I like the fact that, even if the company has a slow quarter in unit sales, it still has all of those existing owners paying for parts. Prospective investors in NIU stock should like that, too.
Bottom Line
Over the past few years, there’s been growing recognition that fossil fuels need to be phased out. That’s led to huge gains for electric car stocks in 2020.
However, investors should not forget electric scooters. Their appeal can be limited in northern climates, but EV scooters solve four big problems: pollution, traffic congestion, affordability and the spread of germs via public transportation.
Because of that, I think the future looks bright for NIU stock. Yes, it’s more expensive now. But with this company’s growth trajectory, that’s not a problem for long-term investors.
On the date of publication, Louis Navellier had a long position in NIU. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.
