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Is Nio a Stock for Long-Term Investors?
Stock Analysis & Ideas

Is Nio a Stock for Long-Term Investors?

Among the sectors most long-term growth investors look to for substantial long-term growth is the EV sector. Of course, this sector is one that’s global in nature.

While Tesla (TSLA) and other U.S.-based EV companies such as Lucid (LCID) have captured the attention of most investors domestically, there are other companies to look at right now.

In China, one of the leading EV players is Nio (NIO). Incorporated in 2014, the company witnessed steady demand growth for its luxury SUVs this past year. Moreover, the company’s latest results highlight the growth potential of this company.

Nio appears to be an intriguing stock, and many investors are bullish on its long-term prospects. I count myself as one of them.

Let’s dive into whether investors may want to give NIO stock a shot as the race for EV market supremacy picks up. (See Analysts’ Top Stocks on TipRanks)

Earnings Overshadowed by Chip Shortage

Nio’s recent earnings from earlier this month highlighted a dichotomy of factors. On the one hand, revenue growth and total deliveries exceeded analyst estimates. The company delivered 24,439 vehicles the past quarter, and brought in RMB9.8 billion, relative to analyst estimates of RMB9.2 billion. That’s very good.

Additionally, the company projected a range of 23,500 to 25,500 vehicles for the coming quarter. Should the company hit the mid-point of this range, investors can expect flat quarter-over-quarter growth, but still year-over-year improvement.

The reason for this more muted growth trajectory? A global chip shortage and various supply chain challenges.

Whether investors like it or not, supply chain challenges appear to be here to stay. In the EV sector, which is more reliant on chips, these shortages can have outsized impacts.

That said, those taking the longer view on NIO stock may note how far this company has already come. The growth in the Chinese market for EVs is expected to continue to outpace most countries globally for some time.

Plans to Venture Outside China

Earlier this year, Nio announced that it is looking forward to starting delivering in Norway in September. This would mark the company’s first venture outside the Chinese market.

The company has already shipped the first batch of ES8 luxury electric SUVs to Norway earlier this year. This will be followed by its ET7 sedan launch next year. Nio has chosen Norway because it features much higher EV adoption rates in comparison to other European sub-regions. 

The Chinese market is huge and fast-growing. Despite this, Nio is making a move outside to become a global leader in the EV race. For investors looking past China, the company’s expansion to foreign markets appears to be a bullish sign. Individuals seeking long-term investments should appreciate this move.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, Nio is a Strong Buy. Out of nine analyst ratings, there are eight Buy recommendations. 

The average Nio price target $60.44. Analyst price targets range from a high of $87 per share to a low of $45 per share. 

Bottom Line

Nio’s domestic presence, and the company’s growth prospects outside of China, are both alluring to long-term investors. The EV market is a global one, and most investors right now are focused on the U.S. market. However, this sector is about to get more siloed, especially given the nationalistic view many countries have toward vehicle manufacturing.

For any Chinese company, regulatory risks and the potential for crackdowns at any moment remain a headwind. While we haven’t seen any significant crackdowns take place in the EV sector yet, this is something investors are clearly pricing into NIO stock right now.

That said, there’s a lot to like about where NIO stock is, and where it’s headed. Those looking at decade or two down the road at what the competitive set may be in this space ought to like how NIO is positioned. This is a company with real growth prospects, and a valuation that looks dirt-cheap, compared to how other EV stocks are trading right now.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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