Nio Looks Attractive Thanks to Blowout Deliveries and European Expansion

Despite the recent dip in NIO stock, Nio (NYSE:NIO) is still up a healthy 18% for the past three months. This is due in part to its June deliveries, which increased an incredible 116% over the prior-year period.

Image of Nio (NIO) logo branded on the exterior of a corporate building.
Source: Sundry Photography / Shutterstock.com

Overall, this company has done incredibly well to combat the pandemic-driven chip supply shortage and boost delivery volumes. Moreover, its plans to go global will help it stand out from competitors. Hence, with plenty of upside, NIO stock has several chapters left to write in its growth story.

That said, the stock isn’t cheap by any standards, as it trades at 13.03 times forward sales. However, with high forward sales growth estimates and multiple growth catalysts, its valuation does seem justified. Moreover, industry stalwart Tesla (NASDAQ:TSLA) is still about ten times larger than Nio by market capitalization, suggesting that there’s plenty of remaining upside with NIO stock.

NIO Stock: Triple-Digit Delivery Growth

Nio had previously guided for lower productions volumes in the second quarter, owing primarily to the global semiconductor shortage. The lower output and delivery expectations slowed down NIO stock considerably in the past few months, but its blowout delivery report for June has since undermined that.

Specifically, Nio delivered 8,083 vehicles last month, representing a remarkable 116% increase on a year-over-year (YOY) basis. Moreover, its June deliveries represented a 20.4% month-over-month gain, after a 5.5% and 2% reduction in May and April, respectively.

For Q2, the company delivered a total 21,896 vehicles, a 111.9% YOY increase that was at the higher end of its guidance for the quarter. Total deliveries for vehicles reached an impressive 117,597 vehicles by June.

Currently, Nio has an annual capacity of 150,000 vehicles, which it has been unable to fully meet due to the current macroeconomic challenges. However, the chip shortage is easing up. That should enable the company to ramp up its output effectively.

Nio’s Plan for Global Expansion

On top of its solid deliveries, Nio has been killing it in its home market of China, which is the world’s largest and most competitive electric vehicle (EV) market. Now, though, it plans to take things up a notch and make its mark on the global stage. The first stop? Norway.

In May, Nio announced plans to sell its flagship seven-seater SUV — the ES8 — in Oslo by September. The following year, it then plans to expand its network to other cities in Norway and deliver the ET7.

Norway is an incredible starting point for Nio. The country’s GDP per capita is more than $65,000, which comfortably exceeds the United Kingdom’s $40,000 or so. The country also lacks domestic competitors in the EV sector yet the population is supportive of EV expansion at home.

Nio plans to localize its ecosystem for Norway, which parallels its Chinese strategy. Basically, it will build its physical and digital infrastructure to expand its brand in the country. It will also open an 18,000 square meter service center as well as battery swapping and charging stations.

Altogether, if Nio can build momentum in Norway, it will be easy for it to expand its footprint in the rest of Europe. That means great things for NIO stock.

Final Word on NIO Stock

Nio has rebounded well from the chip supply shortage and is growing faster than expected. True, NIO stock did dip recently. However, its astonishing June delivery update suggests that it’s still on course to hit a 100,000 annual delivery milestone.

Over a 100% YOY growth in annual deliveries is more than possible, as factory output will normalize come the latter half of this year. Additionally, Nio’s global expansion plans are intriguing and have further cemented the bull case for this electric vehicle stock.

On the date of publication, Muslim Farooque 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.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.


Article printed from InvestorPlace Media, https://investorplace.com/2021/07/nio-stock-looks-attractive-thanks-to-blowout-deliveries-european-expansion/.

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