Nio Is a Buy With Its Strong Position For the Long Run

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Right now, Nio (NYSE:NIO) remains among the strongest, smartest and safest bets in the electric vehicle (EV) vertical. While the EV sector has garnered massive amounts of investment capital within the last year — and is looking like a bubble — NIO stock is not going to pop. 

Nio (NIO) electric vehicle model in a soft blue color
Source: xiaorui / Shutterstock.com

Why? The reason is simple: Nio rides alongside the undisputed pioneer and leader in electric vehicles, Tesla (NASDAQ:TSLA). These two stocks are going to remain winners even when markets correct against EV stock valuations at large.

What do Tesla and Nio both have that other electric vehicle manufacturers lack? In a word, sales. 

NIO Stock and Tesla Win

While 2020 saw many EV companies come on line via special purpose acquisition companies (SPACs), in many cases their respective vehicles will not begin being manufactured for years. Instead, markets rewarded these companies because they represent potential and promise. 

However, many of them will fail because they simply will not be able to produce revenues for quite some time. On the flip side, though, Nio and Tesla are already breaking their own sales records repeatedly. They are carving out a market position that will allow them dominance.

So, when all of the SPAC EVs hit the road in the next year or two, they’ll quickly find a tough environment in which to gain traction. It is a basic case of first-mover advantage. Nio has it. Tesla has it. That makes the run in both NIO stock and TSLA much more sustainable. 

Legacy Resources

There is another overarching factor in play here, though. What’s becoming more and more apparent is that legacy automakers are also in a strong position in the EV market.

Brands like GM (NYSE:GM), Ford (NYSE:F), Toyota (NYSE:TM) and Volkswagen (OTCMKTS:VWAGY) all have a distinct advantage over the EV makers not named Nio and Tesla. They have size and resources. Because of that, its pretty obvious that they will easily be able to carve out large competitive positions in the space. Basically, their vehicles will simply crowd out all but the very best SPAC EVs.

But NIO stock’s seat at the table is secure. Legacy players have the luxury of moving slower, gaining knowledge and then using strong capital positions to build EVs. That’s why the SPAC EVs will fall off once the rubber truly hits the road. They will be behind and won’t be able to compete.

Nio, on the other hand, is already in a solid position, with its vehicles on the road right now. 

Plenty of Upside Ahead

NIO stock has already risen so precipitously that investors would be wise to at least question whether there is wind left in its sails. Indeed, prices have increased by over 1150% over the last year. But I’m in agreement with at least one Wall Street firm who still sees blue skies ahead for Nio.

Wall Street firm Nomura sees NIO rising significantly from its current share price of $58.53. The firm recently initiated buy coverage of the stock on Jan. 22, noting the company’s dominance in the Chinese market.

Importantly, Nomura says Nio’s share price has the potential to rise above $80 per share

Sales, Sales, Sales

In my opinion, investing in Nio makes so much sense because it is simply delivering the goods. And that’s quite literally — it is producing and delivering actual electric vehicles when other EV makers aren’t. Investing in NIO stock isn’t investing in a SPAC-funded promise. It is equity in a company that keeps breaking sales records. 

For instance, as of Dec. 1, Nio delivered 36,721 vehicles in 2020. That represented a 111.1% increase over the previous year. What’s more, the company had delivered 68,634 vehicles in aggregate as of that report. 

China represents about half of the global EV market and Nio is its champion. Tangible results already exist for the company. So, the only rational thing to do is buy and keep an eye on operational numbers. I assume that the company will rein in operational efficiency as its sales continue to rise. That will result in a growing top line, increasing profits and margins.

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

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.


Article printed from InvestorPlace Media, https://investorplace.com/2021/01/nio-stock-is-a-buy-with-its-strong-position-for-the-long-run/.

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