Why Now Is a Good Time to Buy Nio Stock

  • Nio (NIO) is down nearly 30% in 2022, but a number of positive catalysts make NIO stock a buy here.
  • China's lockdowns are easing and the government looks poised to extend EV subsidies.
  • Meanwhile, Nio's battery-swapping stations could be a game-changer for the EV maker in Europe and the U.S.
A large NIO store sign and Chinese brand name. NIO is a Chinese EV company
Source: Robert Way / Shutterstock.com

Nio (NYSE:NIO) has faced its fair share of issues recently. These include production delays due to Covid-19-related shutdowns in China, supply chain issues, analyst downgrades and even a short-seller report that alleges the company has been inflating revenue and net income. NIO stock is down close to 30% year to date.

But the outlook for the Chinese electric vehicle maker is improving, with positive developments in China, as well as the Western world.

NIO stock appears to have bottomed last month, with shares up more than 90% since then. But they still remain at an attractive valuation, making now a good time to buy NIO stock.

NIO Nio $22.36

Nio’s Production Recovers as Lockdowns Ease

Earlier this year, Nio was forced to stop producing its EVs for several days because of coronavirus-related lockdowns that shut down its Chinese suppliers. Beginning in late March, the lockdowns imposed by the Chinese government hit the company’s production and sales. This continued until late May, when Nio finally announced that things were getting back on track.

“In Shanghai, 96.3% of industrial businesses tracked by the government have resumed work, with a production rate above 70%, according to China’s Ministry of Industry and Information Technology,” CNBC reported on June 14.

The easing of Chinese lockdowns should result in a significant production and sales rebound for Nio. Indeed, that process has already started. In May, Nio delivered more than 7,000 EVs, up 38% from April and 5% year over year.

On the company’s first-quarter earnings conference call, held on June 9, Nio CEO William Li said: “Starting from June, while the supply chain and the vehicle production have basically returned to normal, our vehicle deliveries have also gotten back on track.”

Meanwhile, Beijing is reportedly considering extending EV subsidies that were due to expire this year to help support its auto sector. If this happens, it will provide a meaningful boost to the company’s financial results and NIO stock.

In addition to easing lockdowns in the East, Nio is making headway in the Western hemisphere as well.

Nio Eyes Western Expansion

June 28th marked the four-year anniversary of Nio’s battery-swapping service. In those four years, Nio has built 997 stations and completed 9.7 million battery swaps, mostly in China.

As I’ve noted in the past, I believe that battery-swapping stations — which enable drivers to obtain a new, fully charged battery in around five minutes — are a powerful positive catalyst, and not just in China.

Nio has begun expanding beyond its domestic market, opening its first European battery-swapping station in Norway earlier this year. Expanding its battery-swapping service network should help boost demand in Europe. Additionally, Nio charges a monthly subscription fee for its battery as a service (BaaS), which could become a needle-moving revenue generator for the automaker on the continent.

Nio is also reportedly looking to build a factory in the United States, and CEO Li has said he expects Nio’s products will be available in 25 countries and regions worldwide by 2025.

The Bottom Line on NIO Stock

Shares of NIO stock have almost doubled since their May 12 low of $11.67, yet they remain down 56% over the past 12 months. On the bright side, NIO stock is trading at a much more reasonable valuation than it was a year ago at 2.4 times analysts’ average 2023 revenue estimate.

Given the company’s powerful positive catalysts, NIO stock is a good buy for risk-tolerant growth investors.

On the date of publication, Larry Ramer did not hold (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.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.


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