Nio (NYSE:NIO) stock had an epic run in 2020.
After starting around $2.60 on April 1, 2020, the stock hit a high of about $57.20 for a return of about 2,100%. Not only did that crush the returns of the S&P 500, it was well above the more than 600% returns produced by Tesla (NASDAQ:TSLA) last year, as well. Granted, NIO just pulled back to below $38 after cutting guidance on a semiconductor shortage. However, don’t be so quick to write the stock off just yet. In fact, use the pullback as an opportunity.
Near-term, I’d like to see NIO back to $50. Longer-term, I’d like to see it closer to $67.50, as electric vehicle demand and company deliveries explode higher.
One, the EV Boom Isn’t Slowing, So Neither Is NIO Stock
Countries all over the world want millions of electric vehicles on the road.
By 2030, the International Energy Agency says we should see 145 million. By the end of the decade, we could see up to 230 million. Plus, with a pledge to reduce emissions by 50% to 52% by that year, the U.S. could fuel significant upside for the EV sector.
In fact, according to Edmunds’ executive director of insights, Jessica Caldwell, as noted in a recent press release:
“We’re not only about to see a massive leap in the number of EVs available in the market; we’re also going to see a more diverse lineup of electric vehicles that better reflect current consumer preferences. And given that the new presidential administration has pledged its support for electrification, the U.S. is likely to see incentive programs targeted at fostering the growth of this technology further.”
Two, Nio Earnings Growth Is Still Solid
For Q1 2021, the company posted a non-GAAP net loss of 0.23 yuan or four cents per share, as compared to a loss of 1.60 yuan year over year. Revenue soared 481.8% to 7.98 billion yuan, or $1.218 billion year over year. Analysts were looking for a loss of 16 cents per share on sales of $1.02 billion. Gross margins also improved to 19.5% from negative 12.2% year over year.
Better, the company reported 20,060 deliveries, which was 422.7% year over year growth.
While the company still faces challenges with semiconductor shortages, it expects to deliver another 21,000 to 22,000 vehicles in the second quarter. That represents growth of 103% to 113% year over year. Nio also expects total revenues to come in between $1.243 billion and $1.298 billion, which is an increase of 119% to 128.7% year over year.
Three, Nio Is Expanding in the Red-Hot European Market
After EV sales more than doubled to 1.4 million in 2020, Europe is now one of the world’s largest EV markets, all thanks to tighter emission standards, and government subsidies. For 2021, Forbes’ contributor Neil Winton says electric vehicle sales could top a million again.
That’s great news for companies like NIO, which plans to expand to Norway. “It will mark NIO’s first excursion into the highly competitive European market and a turning point for our global market strategy,” says the company. In fact, NIO will hold a conference on the expansion on May 6.
The Bottom Line on Nio Stock
I’d use weakness in the NIO stock as an opportunity to buy. Even with semiconductor shortage issues, the company still sees strong deliveries and revenue growth. It’s expanding into Europe, and we have to consider that electric vehicle growth isn’t likely to slow any time soon. In fact, with the world looking to reduce emissions significantly over the next few years, electric vehicle stock will be some of the top beneficiaries.
With this anticipated growth in Europe, I’d like to see NIO back to $50. Longer-term, I’d like to see it closer to $67.50.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.