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Here’s Why Chinese EV-maker Nio Is A Low-Risk, Long-Term Bet

Nio (NYSE:NIO) is a Chinese electric vehicle maker that is making strong moves in the electric vehicle industry. The company has a huge potential in the market and is consistently growing in terms of revenue and market share.  NIO stock went as high as $66 a share in February but it is showing volatility lately.

A close-up shot of the Nio (NIO) ES8 vehicle.
Source: xiaorui /

Despite reporting impressive delivery numbers and hitting new milestones, the company has not been able to impress investors in the last few months. NIO stock is currently trading close to half of its all-time high, at $35.

This dip is the perfect time to enter the market and accumulate shares. The sell-off could be driven by the Evergrande crisis in China or the chip shortage but there are several reasons to hold on to NIO stock. Let’s dig deeper into them.

Impressive Growth Should Fuel NIO Stock

The delivery numbers reported by Nio are impressive and it shows a stellar year-over-year growth. It recently reported vehicle deliveries for September and beat the projections. The quarterly EV sales hit 24,439 which is over and above the upper end of the guidance of 23,500 units.

It also hit the 10K milestone, delivering 10,628 vehicles in September. It is a year-over-year increase of 126%.

The company has hit new records throughout 2021. It started the year delivering 7,225 vehicles in January 2021, a 352% year over year increase. February saw 5,587 vehicles delivered, a 689% YoY rise.

The deliveries again picked up and crossed 7,000 a month with a slight dip in May and August. However, September numbers are the most impressive and show the strong potential of the company.

Considering the fact that the chip shortage hasn’t hit EV makers as hard as traditional OEMs, the delivery numbers will only rise from here. Additionally, Nio has the production capacity to meet the growing demand in the industry. In the last six months, the lowest the stock has traded for is $36 and there has never been a sudden dip in the stock. It is always gradual, which reduces the risk of investing in NIO stock.

Wall Street Loves NIO Stock

I love EV stocks. I am fond of NIO stock but I’m not the only one. Wall Street loves it. too. Goldman Sachs analyst Fei Fang upgraded the stock to “buy” from “hold” and maintained a price target of $56. The analyst believes that the upcoming ET7 model has massive potential in the market.

Further, Ming Hsun Lee, a Bank of America-Merrill Lynch analyst has reiterated a “buy” on NIO stock with a price target of $62. The analyst stated that the solid volume of sales and model pipeline in addition to the charging solutions will enhance the user experience.

The prospects of a new model and global expansion make the stock attractive at the current level.

The Bottom Line

Nio looks attractive for long-term investors. It has low risk and the valuation will grow with time. The sales are going to increase in the coming months as the chip shortage is almost over and the company will try to meet the International demand. The strong delivery numbers will ensure that the key margins are improved.

You might not see a sudden surge in the stock but it will slowly and gradually move upwards. The third-quarter results could be impressive and game-changing for the company. The chip shortage hurt all automakers in the industry but Nio has come out riding on a high wave.

EVs are the future of transportation and with government support and subsidies, they are going to be the next hot thing in the market. This is a nice entry point for investors.

On the date of publication, Vandita Jadeja 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 Publishing Guidelines.

Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long-term gains. Her knowledge of words and numbers helps her write clear stock analysis.

Article printed from InvestorPlace Media,

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