This won’t be the first time that Nio (NYSE:NIO) has made me look like an idiot. In fairness, I wasn’t the only one shoveling dirt on the company’s grave in 2019 and early 2020. But earlier this year, I was convinced that it would be difficult for NIO stock to climb above $60.
I did have reasons for my thesis. The electric-vehicle (EV) bubble was bursting, and the global chip shortage was continuing. And speculative investors had decided to throw their money behind a series of stocks of questionable merit.
But Nio has continued to put the pedal to the floor. And in the process, it’s given investors three good, independent reasons to believe that its stock can leave the $60 mark in the rearview mirror.
Nio Is Delivering the Goods
Nio is on pace to deliver approximately 84,000 vehicles in 2021. That will fall just shy of the company’s original projection of 90,000 vehicles.
However, the shortfall is partially due to the global chip shortage. Moreover, the chip shortage makes Nio’s delivery total more impressive.
Indeed, despite the shortage, the company is running less than 10% below its 2021 delivery target. Many things can happen between now and the end of the year. But in a sector in which disappointing delivery numbers are the norm, Nio stands out.
The Support of the Chinese Government
The Chinese government is throwing its weight behind Nio in an effort to ensure that the company attains EV supremacy. It doesn’t matter how you feel about the Chinese government; its aid has been and will continue to be tremendously helpful to Nio.
In fact, the company was likely headed for bankruptcy before the government bailed it out. After injecting $1 billion into Nio, the Chinese government has a 24% ownership stake in the company.
But that’s not a reason to avoid investing in NIO stock. In fact, I’m arguing quite the opposite; Nio is playing the hand it was dealt, and right now, in fact, the company is playing its cards quite well.
Given Beijing’s support for Nio, I wasn’t worried about the fate of NIO stock after the Chinese government’s recent crackdown on DiDi Global (NYSE:DIDI). Equating DiDi to Nio is clearly akin to equating apples and oranges.
Further emphasizing this point, Nio was recently named the “most promising brand for growth” in a survey conducted by cnEVpost. According to the survey, Nio’s assets could be worth up to 736.1 billion yuan ($105 billion) in the future.
Buy NIO Stock for Growth Now and in the Future
Since Nio last reported its quarterly earnings in April, three analysts have increased their price targets on NIO stock and one analyst has initiated coverage of the shares. In all four cases, the analysts’ price targets were higher than the current price of NIO stock. And right now, their average price target is over $54 per share. Just 30 days ago, it was slightly over $51.
I suppose that the analysts’ optimism could be seen as a fourth reason to buy NIO stock. But you get the point.
I wrote earlier this year that Nio had to manage the privilege of expectations. Nio is a buy because it’s doing just that. The company is reporting strong delivery numbers, has an impressive in-house charging solution and the support of its home country’s government.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.
