Investors May Want to Consider Buying Nio for the Long-Term

Nio (NYSE: NIO) is one of my favorite electric vehicle (EV) stocks. For quite some time, it could do no wrong. In fact, between 2020 and 2021, the stock accelerated from a low of $3.40 to about $67. This was as governments around the world announced they wanted millions of EVs on the roads. Also, according to Ernst & Young, electric vehicles will outpace combustion engines in the next 12 years, reported by The Street. “By 2045, non-EV sales were seen plummeting to less than 1% of the global car market.”

Earnings were strong for Nio. Deliveries were ramping up. The company was even expanding throughout Europe. Analysts were out with buy ratings and raised price targets. Most recently, UBS analyst Paul Gong upgraded the stock to a buy with a price target of $32.

With all of that, I thought Nio could rally back to $67. While I still believe that is possible, I may have to wait a bit longer than I initially thought.

More recently, the company suspended production thanks to Covid-19 restrictions in Shanghai. Additionally, according to Barron’s, Nio stated that “since March, due to reasons to do with the epidemic, the company’s supplier partners in several places including Jilin, Shanghai and Jiangsu suspended production one after the other and have yet to recover.”

Once the bad news has been priced in and the new Covid-19 scare dissipates, I’d be a buyer on weakness. We have to remember that EV sales are accelerating all around the world in a global effort to reduce carbon emissions.

Plus, consider this. According to Bloomberg contributor Colin McKerracher, “The world is about to pass another important milestone in electric vehicle adoption: 20 million plug-in vehicles on the road globally, come June, according to BNEF estimates. That’s remarkable growth from only 1 million EVs on roads in 2016.”

While things may look bleak for NIO in the immediate-term, longer-term, it could see $67 again.

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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