With Competitive Models on the Way, Nio Is Down But Not Out

It was a phoenix moment for Nio (NYSE:NIO) when it emerged from penny stock status in 2020 to highs of $67 in early 2021. However, the last few quarters have been disappointing from a stock performance perspective. Over the 12-month period, NIO stock has declined by roughly 34%.

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

I believe that this dip provides a golden opportunity for accumulation, however. On the correction, there are two important points to note.

First and foremost, a multi-fold rally has been followed by a 35% correction. Over a 24-month period, NIO stock is still among the best performers. Furthermore, Nio has used its stock upside to create a strong cash buffer. Recently, the company raised $2 billion from an at-the-market offering.

Really, the weakness in NIO does not represent any big business headwind. In fact, deliveries have been robust. And more importantly, there seems to be some big catalysts lined up for 2022 and 2023, making this name an attractive bet.

NIO Stock: Competitive Models to Boost Growth

One reason to like Nio is its pipeline of new launches for 2022. Specifically, the company’s ET5 is set for launch in September 2022. That model will likely be a significant rival to Tesla’s (NASDAQ:TSLA) Model 3 in China.

The initial bookings seem to be encouraging as well; the ET5 is the most pre-ordered model of Nio vehicles. As its commercial launch nears, the order book should swell.

Pricing is one major reason why. Before government subsidies, the ET5 will likely be priced at $51,450. With Nio’s battery-as-a-service (BaaS) plan, the price will also likely come down to $40,470.

Deutsche Bank analyst Edison Yu believes that the ET5 can outsell the ET7 by 2023. This puts the potential growth in deliveries into perspective.

It’s also worth noting that Nio has a total of three models for launch in 2022. This includes the ET5 and an SUV. The new models will be on the Nio Technology Platform 2.0.

Clearly, the current year should be bright for this company. I would not be surprised if growth accelerates meaningfully from 2023 to 2025.

Big International Expansion Plans

Back in September 2021, Nio forayed into the international markets with the ES8 SUV. But the company’s launch in Norway is just the beginning of its ambitious expansion plans into markets around the world.

In 2022, the company has plans to enter Germany, the Netherlands, Sweden and Denmark, for instance. Further, Nio is likely to expand to 25 countries by 2025. Including the at-the-market offering, Nio already has a cash buffer that’s in excess of $9 billion. This will help in accelerating its global presence.

It’s also worth mentioning here that Nio is focused on technology and innovation to drive growth. Recently, Lucid Motors (NASDAQ:LCID) announced that its first car, the Lucid Air, has been rated by the U.S. Environmental Protection Agency (EPA) with a range of 520-miles.

According to Nio, the ET5 has a range of 1,000 kilometers (or 621-plus miles) with its 150-kilowatt hour Ultralong Range Battery. Going into the international markets, the company is equipped with the latest in terms of technology. This includes range, autonomous driving (AD) and augmented reality (AR) technologies.

Overall, Nio appears to be well-positioned to cater to the needs of a bigger addressable market. This will ensure sustained growth in vehicle deliveries and the top line. Sure, with international expansion, margins will likely be impacted due to higher sales and marketing. But the markets will focus instead on the company’s broadening audience. Things seem optimistic on that front for NIO stock, considering the technology perspective.

The Bottom Line on NIO Stock

NIO stock looks attractive after a meaningful correction. In the next 12 months, the company has three new model launches planned. At the same time, manufacturing capacity expansion will support its international growth plans.

Nio will also continue to benefit long-term from positive industry tailwinds. The company has boosted its balance sheet cash and seems well-positioned to capitalize on the growth momentum in electric vehicles (EVs) globally.

The best time to buy a quality stock is when sentiments are down. NIO stock looks to be positioned for a strong reversal in trend.

On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.


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