A leader in manufacturing smart electric vehicles, NIO (NYSE:NIO) is one of the top EV makers catering to the thriving Chinese market. With the support of the Beijing government and a strong move toward EVs, Nio is enjoying the attention and growing demand. NIO stock is up 24% in the past six months and is trading close to $40 today.
However, the stock is falling after the third-quarter results. The company reported a narrow loss at $130 million on revenue of $1.52 billion, which is a 116% rise from the same quarter previous year.
Nio is often referred to as the Tesla (NASDAQ:TSLA) of China and considering the momentum at which it is growing, the company could soon be making big strides in the industry. The October delivery numbers were disappointing but this does not affect the fundamentals of the company.
Nio sets itself apart with solid technological breakthroughs and innovations. I believe NIO stock has a long way to go and this is only the beginning. With that in mind, let’s dig deeper into my bullish thesis for the shares of the Chinese EV maker.
NIO Stock’s Had a Wild Ride
Nio has enjoyed a wild ride over the past year. The delivery and revenue numbers are proof that the company is consistently growing. NIO stock was trading at $6.90 in June 2020 and skyrocketed to $54 in November 2020. It dipped for a while and then hit an all-time high of $66 a share in January 2021.
The stock has shown volatility since then and has been trading close to the $40s. It is currently exchanging hands at $40 and change. It has not been able to surpass $50 since July. However, I think the dip in NIO stock is a chance to buy because it is a long-term play.
Sales Are Rapidly Expanding
EVs are not only limited to China. The demand is everywhere and Nio is already moving toward European countries to cater to the needs of the consumers. It has already set up a service center in Oslo and could plan expansion there. China sales have been snowballing, and have consistently grown over the past two years except for a dip or two in certain months, due mainly to the chip shortage or supply chain issues.
The first half of 2021 has been exceptional for the company’s sales and it hit the 10,o00 milestone in August and September. The company did report a severe dip in deliveries for October at 3,667 but that was due to the supply chain issues. This is not something that can last forever and will not have a long-term impact on sales. With sales growing rapidly, Nio’s cars are highly successful.
If not for the supply chain issues, the delivery numbers could have hit a massive high. However, the company has expansion plans and aims to get to 600,000 units by the end of next year. The goal is ambitious but certainly possible.
Consumers love Nio cars and the delivery numbers are proof. There is a lot of speculation about the new model that will be launched on NIO Day on Dec. 18 and it will likely work in the favor of the company.
The Bottom Line
Nio is a solid company with strong growth potential. If it can manage to handle the supply chain issues and start to ramp up the marketing efforts for ET7, it will have mind-blowing deliveries in the coming year.
Deutsche Bank analyst Edison Yu has a price target of $70 on the stock with a buy rating. The analyst expects the monthly deliveries to improve in this quarter.
The company has reported solid revenue and successfully managed to reduce the loss. It is a sign that Nio is moving in the right direction and could be winner in the long run.
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.
