With Strong 2022 Catalysts, Nio Stock Could Accelerate Higher

The last time I weighed in on Nio (NYSE:NIO), I said, “EV stocks like NIO could easily accelerate higher over the long term… It’s incredibly oversold at major support. Delivery numbers and earnings growth continues to impress.” That was on Oct. 18, as the electric vehicle stock traded at $38.05.

A Nio (NIO) sign and logo on a tan concrete building.
Source: Sundry Photography / Shutterstock.com

Shortly after, it would run to a high of $44.27 before slipping to triple bottom support around $28.30. While the stock appears weak at the moment, don’t write it off just yet.

With impressive deliveries, and solid catalysts ahead, I’d like to see NIO again at $44.27, especially with governments all over the world pushing for millions of EVs. President Joe Biden, for example, wants electric vehicles to make up about 50% of all new vehicle sales over the next decade, as I noted on Oct. 18.

In short, there’s a lot to like about EV stocks, like NIO.

NIO Deliveries Set to Accelerate

In December, according to a company press release, the company delivered 10,489 vehicles — a 49.7% jump year over year. For the fourth quarter, Nio deliveries reached 25,034, a 44.3% increase year over year.  For full-year 2021, Nio deliveries were up 109.1% year over year to 91,429.

Even better, those full-year 2021 numbers more than quadrupled from 2019, according to Nio.

2022 could be even better. Not only will NIO start delivering its three new vehicle models developed on its NIO Technology Platform 2.0, its second factory will be put into operation. Plus, the company expects to bring its products and services to Germany, the Netherlands, Sweden and Denmark, according to the company’s press release.

NIO Just Forecast Double Digit Revenue Growth

Far better, earnings growth is racing higher.

In its third quarter, the company’s revenues soared 116.6% higher to $1.52 billion. Vehicle margins grew from 14.5% to 18%. Better, the company forecast fourth-quarter revenue growth of between 41.2% and 52.2% to a range of $1.45 billion to $1.56 billion.

Helping, “According to Mordor Intelligence, the market reached $98 billion in 2019 total revenue which it forecasted would grow at a 31% average annual rate through 2026…The Chinese government is helping to propel this growth. It wants to slash exhaust emissions and reduce its dependence on oil imports. In Beijing the number of permits for internal combustion engine vehicle registrations is limited to 10,000. China also offers considerable tax exemptions for EV buyers,” as reported by Forbes’ contributor Peter Cohan.

It’s No Wonder Analysts are Bullish 

Macquarie analyst Erica Chen, for example, just launched coverage with a buy rating, and a price target of $37.70. Even HSBC analyst Yuqian Ding raised his price target on NIO to $54 from $43, with a buy rating after its December delivery report.

Deutsche Bank analyst Edison Yu also has a buy rating with a $70 price target based on key catalysts. One, the company is expected to deliver its new ET7 Sedan in March. Two, Nio could unleash another auto model by the middle of the year. Three, the analyst believes Nio could release a lower price, mass market vehicle by the end of the year.

But wait, there’s more.  Over the last few days, European asset manager, DNB Asset Management raised its investment in the stock. In fact, according to Barron’s Ed Lin, the firm bought another 144,250 NIO ADRs at the end of the fourth quarter. That now leaves DNB with 833,746 NIO ADRs.

Yet, with all of these bulls and catalysts, NIO is still severely oversold at $30.25.

However, I don’t expect the stock to stay this beaten down for long. With deliveries likely to accelerate, earnings gaining momentum, and plenty of bullish analysts, NIO could again challenge $44.27 shortly.

On the date of publication, Ian Cooper 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

Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.


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