Electric vehicles (EVs) have been a hot topic for the past year. The rise in demand for EVs across the globe has given a push to develop new models, with manufacturers like Nio (NYSE:NIO) clearly enjoying the attention. The company has benefitted from favorable Chinese government policies and is often referred to as the “Tesla (NASDAQ:TSLA) of China.” Nio has been a strong competitor for Tesla with an exceptional product line. NIO stock has enjoyed a strong rally in the last six months.
The stock has been volatile recently, moving from $66 in January to $43.29 as of writing. The stock has seen 1,000% gains in the past year and the recent dip presents the right opportunity to add it to your portfolio.
Nio reported fourth quarter results on Monday with revenues totaling over $1 billion. Despite the slow delivery numbers in February, I am bullish on the stock. This pullback is the perfect time to make the smart move.
Strong Q4 Earnings and NIO Stock
In the Q4 earnings report, Nio reported revenue of $1.02 billion, around what analysts expected. It is an increase of 133% from the same quarter in 2019 and a 47% increase from Q3 2020. The total revenue for the year stood at $2.5 billion, showing an increase of nearly 108% from the previous year. The company reported the quarter earnings loss of 14 cents a share compared to a loss of 39 cents per share for the same period last year. Vehicle sales hit $946.2 million and is up 130% from a year ago. Nio also hit positive cash flow from operating activities in the quarter and for the year.
The vehicle deliveries in Q4 reached 17,353, a marked increase over the 12,206 vehicles delivered in Q3. It delivered 5,578 cars in February, while rival XPeng (NYSE:XPEV) delivered 2,223 cars in the same period. The company attributed the increase in deliveries to the expansion of its sales network and better product offerings. The numbers are nothing short of spectacular and the company has made a stellar start to the year.
In the revenue guidance, Nio expects Q1 revenue of $1.13 billion-$1.15 billion and vehicle deliveries to be between 20,000 and 20,500 vehicles. The earnings report did not have much positive impact on NIO stock but there is not much for the investors to worry about. The company has strong value and business potential to grow in the coming years. It also enjoys an impressive liquidity position. With stellar revenue and delivery numbers, NIO stock will only move upward.
Global Expansion Plans
The future expansion plans of Nio make it a strong growth stock. To keep up with the growing momentum of electric vehicles across the world, Nio plans to sell its cars in Europe starting mid-2021. Additionally, it plans to enter other markets in 2022. Its rival Xpeng has already made its mark in Norway with the recent shipment of G3 Smart Electric SUVs.
However, there are some hurdles for the company. Nio warned of slow production and delivery due to chip shortage. The global chip shortage could lead to the manufacturing of fewer cars in the coming quarter. Nio planned an increased production capacity from 7,500 to 10,000 in February, but the shortage lead to a fall back to the previous 7,500 production capacity, projected until June. However, the company expects manufacturing to reach total production capacity of 150,000 vehicles in July. Nevertheless, it should not have much of an impact on the revenue of the company because the demand is only going upwards.
Nio is also set to begin deliveries of et7, the first non-SUV consumer car for next year. The pre-orders for et7 have exceeded the orders of all other Nio models.
The Bottom Line
There is so much going right for NIO stock. The momentum of the EV industry is enhanced by the optimism of investors and the U.S. government. Wall Street Analysts are also bullish on the stock. Out of 10 analysts on Tipranks, seven have a buy rating while three have a hold rating with a price target of $68.33. The recent decline in stock price is not a cause of concern because Nio has strong growth potential and expansion plans. The company will generate impressive revenue and sales numbers in 2021.
This dip is the perfect opportunity to buy.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.