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Ride This Upsurge in Nio Stock to Profits Before It Really Catches Fire

After languishing for months, maker Nio (NYSE:NIO) stock is finally breaking out with a 10% move higher over the last week.

A Nio (NIO) sign outside of the company's facilities in Shanghai, China.
Source: Andy Feng / Shutterstock.com

It’s been feast or famine for shareholders of Nio over the past 18 months.

After exploding to a 1,173% gain in 2020, rising from $3.83 to $48.74 between the first and last trading days of the year, NIO stock has struggled to find its footing since peaking at an all-time high of $66.99 in February of this year.

The share price fell as much as 62% this spring, dropping all the way down to $25.46 in May before inching up to $30 and trading sideways over the summer months.

However, Nio’s stock has been on a tear since the start of October and has risen 14% in the last 30 days. It trades today at just shy of $40.

Now might be a good time for investors to reconsider China’s leading electric vehicle manufacturer and ride the current upsurge to profits.

NIO was ignited on news that investment bank Goldman Sachs (NYSE:GS) had upgraded the company’s stock to a “buy” rating and forecast that they could rise more than 60% to $56 per share.

The Goldman upgrade came after Nio announced that it had successfully completed a milestone in the construction of its new manufacturing plant in Hefei, China.

The new plant, which is being built in partnership with JAC Motor, will give Nio the capability to make up to 300,000 vehicles a year. That’s an upgrade from the 240,000 electric cars that Nio originally estimated its new plant would produce annually.

The additional manufacturing capacity comes as Nio reports much better-than-expected deliveries and expands into Europe for the first time.

A Closer Look at NIO Stock

For September, Nio reported that it delivered 10,628 vehicles during the month, marking a year-over-year increase of 125.7%. For this year’s third quarter, the company delivered a total of 24,439 vehicles, up 100.2% year-over-year.

At the end of September, the total number of vehicles delivered by the company stood at 142,036. Plus, Nio has just expanded into Norway, its first foray outside of China, and has announced plans to begin sales in Germany next year.

Another reason why Goldman Sachs and others are high on NIO stock right now is the fact that the company is about to deliver a new luxury sedan in early 2022 called the “ET7” that could help to supercharge its sales.

In its analysis, Goldman Sachs compared the ET7 to other premium sedans made by BMW (ETR:BMW) and Daimler (ETR:DAI).

Goldman Sachs forecast that the ET7 could reach similar levels to those of the BMW 7 series and Mercedes S-class, which each sell more than 10,000 units per month in China alone. With Nio pushing into the European market, sales of the new E7 could really takeoff and help Nio to become a global player in the electric vehicle market.

Nio is also a unique player in the electric vehicle space as it runs a proprietary “Battery as a Service” operation whereby owners of its cars lease and swap batteries at power-swap stations around China. It’s a similar function to the way that empty propane tanks are swapped for full ones or refilled at places such as Costco (NASDAQ:COST).

While some analysts have scoffed at the Battery as a Service model, it has proved popular and lucrative for Nio. The company recently announced that it completed its 4 millionth battery swap within China. Consumers in China seem to have accepted the notion of renting and swapping batteries, which provides a steady source of income to Nio.

Jump on the NIO Stock Bandwagon

Nio is doing a lot of things right and the success is finally being reflected in its stock.

After being in the doldrums for most of this year, NIO stock is rallying higher as it grows, expands and exceeds the expectations of Wall Street.

With the share price still barely below $40 a share, investors should jump on the bandwagon and take a position now before the stock marches higher.

The median price target on the stock is currently $58.37 a share, suggesting a 55% gain from current levels. The high estimate on the stock is $92.24. As it pushes into Europe and with the ET7 luxury sedan on the horizon, NIO stock is a buy.

Disclosure: On the date of publication, Joel Baglole 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.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.


Article printed from InvestorPlace Media, https://investorplace.com/2021/10/ride-this-upsurge-in-nio-stock-to-profits-before-it-really-catches-fire/.

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