While 2020 was an excellent year for many stocks, few received the acclaim electric car-maker, Nio (NYSE:NIO) did. In the last nine months, Nio stock soared from $5 to $60, with analysts betting on more upside in the future.
Many see the EV market as a bubble that could burst at a moment’s notice, but Nio stock has a lot going for it, fundamentally speaking. With plans to enter the U.S. and European markets in the near future, there’s good reason for investor optimism.
Following a near-death experience in 2019, Nio’s terrific comeback makes this stock a worthy investment for the long haul.
Nio Stock Is Stronger Than Ever
With shares up more than 1000% this year and a market value higher than General Motors (NYSE:GM), Nio’s spectacular run is tough to imitate.
For early Nio investors, the recent gains could serve as an incentive to cash out on the winnings but there is reason to believe that the company is in for much greater upside. Take Nio’s plans for expansion for example.
The EV maker inked a deal with the Hefei Anhui government in China to build an industrial park in the region. The facility will house the R&D and demonstration departments to support Nio’s existing headquarters in the region.
In addition to local expansion, Nio has its sights set on entering the European market by the end of 2021. Its first destination is Oslo, Norway where the company is in the process of building a team. Additional details on its entry into the region are expected to emerge soon.
In more buzz-worthy news, there are also talks of Nio’s entry into the U.S. market at some point. While this is still a rumor at best, its fruition could be a game-changer for the company. Whatever the case Nio stock was trading higher on the rumor alone.
With regional and global expansion fueling the stock on one end, Nio’s internal growth is pushing its share price even higher. For the month of January, the company reported deliveries of 7,225 vehicles in January which was up by 2% from the month before.
This strong performance comes despite a weak Chinese auto market as a result of the pandemic. Nio shares were up 3% following the news with numerous analysts giving the stock a ‘Buy’ rating.
A Look at the Financials
Nio’s impressive January deliveries set the stage for some strong earnings in the upcoming quarter. A 352.1% increase in deliveries (year-over-year) is by no means a small feat and will result in a significant push in overall revenue.
The company’s deliveries for the year beat its rival XPeng (NYSE:XPEV) by a wide margin. Optimism on The Street is high with Morgan Stanley giving it a price target of $80.
Given Nio’s stellar track record, there is a good chance this price could go higher. According to a report in Seeking Alpha, the monthly revenue growth potential could push deliveries past the 105,000 mark. This could increase revenue to $5.4 billion.
The value will also be bolstered by expansion into Europe which could add significantly to its global market share. At its last Nio Day event, the company announced plans for its autonomous vehicle, set to release in 2022. Nio’s entry into the self-driving market will enable it to compete directly with the likes of GM and Volvo (OTCMKTS:VLVLY), which are working on their own version of the car.
The Bottom Line
If you are looking for a strong EV play, Nio stock is your best bet in the market right now. Although its valuation is definitely high (market capitalization of $95 million), the stock is worth buying for its long-term tailwinds.
With strong delivery numbers and expansion into global markets this year, Nio is in for much bigger gains. You may be tempted to cash out on your earnings if you’ve held on to Nio stock for a while but looking at the bigger picture it is a keeper for the long-haul.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.
