China’s electric-vehicle (EV) maker Nio (NYSE:NIO) had an extraordinary 2020. Nio shares started the year near all-time lows but exploded in the summer. Record-high closes were hit regularly for months. By the end of November, NIO stock topped $55, a whopping 1,389% gain since the start of the year.
Then, the rug was pulled out as the specter of Chinese stocks being delisted was raised. Despite reporting a record number of car deliveries in November, NIO was hammered. In two sessions, company investors watched their holdings drop in value by 16%.
The threat of delisting is scary, so I can understand why many investors ran to the exits on Nio. However, I think that was a knee-jerk reaction. NIO stock has an “A” rating in Portfolio Grader, and it recently made my list of “7 Auto Stocks to Watch Going Into 2021.” Nio has bounced back nicely from the scare and is on the verge of charging into growth again.
Here’s why NIO Stock still has plenty of upside.
EVs Are Selling Like Hotcakes
David A. Kirsch is an associate professor of management and entrepreneurship at the University of Maryland’s Robert H. Smith School of Business. He recently wrote:
“For decades, the electric vehicle has been seen as the car of tomorrow but never quite the car of today.”
That’s been a problem for EV investors. However, in 2020 it seemed that the EV was finally becoming the long-promised “car of today.” In a year where a global pandemic upended daily life, hammered airlines, closed retailers and forced millions of people to work from home, EV stocks caught fire. Between improved technology, increased consumer awareness of the environmental impact of driving gas-powered cars and a presidential campaign run with a focus on a Green New Deal, EV manufacturers were in the spotlight.
In 2019, Nio had an absolutely miserable year. After topping $10 in March of that year, it was all downhill. By the end of October 2019, NIO stock had dropped to the $1.50 range, plummeting 85% over the course of eight rough months.
I don’t think anyone would have predicted the turnaround the company pulled off in 2020. That being said, I did highlight this stock’s strong growth prospects last June — when Nio shares had just topped $6.
NIO shares definitely benefited from the halo effect that surrounded all EV stocks last year. But Nio also did a tremendous job of fixing technical issues and executing on production. The company’s November 2020 delivery numbers tell the story. Nio delivered 5,291 vehicles to customers. That was up 109.3% year-over-year and also set a monthly production record for the company.
A Unique Battery Approach
In addition to producing and selling more cars than ever, Nio also made another big move in 2020.
In August, the company launched a new Battery as a Service (BaaS) program. BaaS features swappable batteries that offer Nio customers significant flexibility. They can buy the car, but subscribe to the battery service to reduce the initial purchase price. They can easily swap those batteries as needed, including the option of upping their subscription to a higher capacity model. BaaS also allows for swapping out a battery for a freshly-charged one at one of more than 140 Power Swap stations across China — eliminating the lengthy wait for a battery to charge.
BaaS gives Nio an edge over EV competitors. In October, the company announced it had already completed its millionth battery swap.
The elephant in the room, and the reason why NIO stock took a hit in November and December, is the threat of delisting. Yes, it could happen under the Holding Foreign Companies Accountable Act, which passed in December. However, once the process kicks off, Chinese companies have three years to comply with U.S. audit requirements before being delisted.
That’s a lot of time to be prepared, and a lot of time in which the relationship between the U.S. and China could thaw. It’s important to go into an investment in a Chinese company knowing delisting could happen, but now is not the time to panic about the possibility.
Bottom Line on NIO Stock
Based on its trajectory, now is the time to act if you want this high-flying EV stock. Nio was in the dumps for 2019, showed signs of life early in 2020, then kicked into high gear starting last summer. The only thing that put a damper on the NIO stock growth story was the threat of delisting — and that’s at least three years away. The market has realized this, and NIO is surging once again.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (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.