As electric vehicles become an integral part of our lives, NIO (NYSE:NIO) is giving solid competition to Tesla (NASDAQ:TSLA). While $1,000-a-share Tesla stock is too expensive for many investors, NIO stock is a solid buy at $40. There is ample upside in the coming months.
Countries are committing toward a better tomorrow and this has led to a rise in the demand for EVs. China is leading the industry with a sales of 42% of the global EV sales in the first six months of 2021.
The support from the Chinese government, a reduction in the cost of production and high demand have boosted NIO’s share of EV sales. Battery-powered cars are witnessing solid demand globally and NIO could benefit from the strong demand in both its domestic market and newly entered European markets.
All of this makes NIO stock a good buy before the third-quarter results, expected on Nov. 16. Let’s dig deeper into my bullish thesis for NIO stock.
Expect Solid Q3 Results
NIO did not disappointed investors in the first two quarters of 2021 and I believe it will report solid results for the third quarter as well. Q1 deliveries stood at 200,60 with revenue of $1.22 billion and a net loss of $68 million. In Q2, the company delivered 21,896 vehicles and reported revenue of $1.30 billion with a net loss of $90 million.
The third-quarter vehicle delivery numbers were higher than those of both of those previous quarters. It delivered 24,439 vehicles in Q3, much above the forecast of 22,500 to 23,500 vehicles. However, that may not have a huge impact on the net loss.
NIO is also making inroads into Europe. Norway has the highest penetration of EVs and the car maker delivered its first batch of EVs to that country last month. We may see a rise in the expenses toward expansion in foreign markets but it will be temporary.
I believe NIO will beat analyst expectations in the third quarter and the stock will soar from here.
NIO Is Ready For a Stage Up
The EV maker is focused on expansion and growth. It has managed to increase the production capacity of its manufacturing unit to meet the growing demand. This shows the potential of the car. Once the company provides further clarification about the mass production plans, consumers will be in a better position to choose a car that fits their price point.
NIO is offering a wide range of products to meet the needs of every consumer. It is expected that the company will launch a new car at NIO Day in December. The event could take NIO stock higher and reap returns, similar to what has historically been the case with Apple’s (NASDAQ:AAPL) new product intro.
All in all, the company is in a strong position in the industry and it has massive growth potential.
NIO Stock Is Promising
NIO stock has performed well despite the massive competition in the EV industry. The shares are up 48.3% in the last 12 months.
New automakers are entering the market and the competition is heating up. BYD Company Limited (OTCMKTS:BYDDF), is just one name to watch. Additionally, the industry is facing a chip shortage but NIO has taken several steps to maintain growth in the long term. Besides the EVs, it generates revenue from the battery-as-a-service model and this has attracted several users to its cars.
NIO is soon to enter the mass market and will provide further details about it. With strong demand and a solid product line, NIO is here to stay. The company will prove its worth in the third-quarter results and will not disappoint.
NIO stock looks promising for the long term and is a buy before the November earnings release.
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 InvestorPlace.com 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.
