NIO Inc. (NIO) shares rallied 9.6% to close at $49.40 on June 29. NIO is the leading manufacturer of premium smart electric vehicles in China.
There is no doubt that NIO is well-positioned to cement a strong long-term foothold in the EV market of China. The rising demand for its models is enhancing the company’s top-line growth. Furthermore, an EV-focused government mandate is an advantage for NIO in the massive Chinese market.
Per a report from Mordor Intelligence, the Chinese electric vehicles market is expected to grow at a compound annual growth rate (CAGR) of 31% in the 2021-2026 period. China has been working toward the development of sustainable transportation due to growing environmental concerns and a rise in exhaust emissions. As a fix, the country is working on the electrification of the transport sector.
Given the strong projections of the Chinese EV space, the company is set to grow profitably.
“NIO Power Day” Powers Nio – Report
Yesterday, NIO announced that it will host a NIO Power Day on July 9, CnEVPost reported.
The event aims to provide a glimpse of products and technologies related to the Nio Power unit. Furthermore, it plans to unveil strategies and lay out plans related to energy replenishment.
The NIO Power Day announcement is likely one of the major catalysts for the increase in the share price of the company yesterday.
However, it remains to be seen whether the upcoming event can make investors happy, further causing a record jump in its share price.
Apart from the above, there have been a series of events happening lately which could have sparked optimism about the company’s future.
Something Unbelievable! NIO Surpasses Tesla
NIO is dubbed as the Tesla (TSLA) of China, but seeing the recent price trends, NIO has surpassed Tesla in terms of price performance.
This is a great piece of news for NIO lovers.
With a market capitalization of $80.9 billion, NIO has gained 16.7% in the past month and has skyrocketed 583.3% over the past year. (See NIO stock chart on TipRanks)
In contrast, TSLA stock is up only 10.4% in the past month and has gained 241.2% in the past year.
Approval for ES8 Solidifies NIO’s Position in Europe
On June 10, NIO announced that it has received the European Whole Vehicle Type Approval (EWVTA) for its latest flagship electric SUV, the ES8. The EWVTA certification marks a foundation for the entry of the company into Norway and the overall European market.
Furthermore, the NIO ES8 for Europe has been officially approved for mass production and license plate registration in all EU countries.
On May 6, NIO had marked its first step overseas by making an entry into Norway. The company plans to establish a solid ecosystem in the country, comprising cars, services, and digital experiences.
NIO’s effort to venture into Europe is a step forward to expand its top-line growth and multiply its customer base.
Strong Sales Volume in May
NIO has witnessed a massive surge in sales volumes in the month of May. The company delivered 6,711 vehicles last month, marking a year-over-year rise of 95.3%. The deliveries consisted of 1,412, 3,017, and 2,282 for ES8s, ES6s, and EC6s models, respectively.
Although vehicle delivery in the last month was adversely impacted due to the shortage of semiconductor chips and certain logistical adjustments, the company expects to accelerate vehicle delivery in the next month.
The rising demand for ES6, ES8, and EC6 models should continue to expand the company’s top-line growth.
Agreement Renewal – A Driving Factor
On May 24, NIO renewed its agreement with Jianghuai Automobile Group Co., Ltd. (aka JAC) and Jianglai Advanced Manufacturing Technology (aka Jianglai), for the joint manufacturing of NIO vehicles for three more years.
Per the deal, JAC will continue to manufacture NIO models and potentially other models in the pipeline for another three years, through May 2024. Furthermore, JAC will increase the manufacturing capacity of the factory to meet the rising demand for NIO vehicles. Jianglai will be in charge of parts assembly and operation management.
The agreement will allow NIO to benefit from economies of scale and increased manufacturing efficiency.
Stellar Q1 Earnings Results & Q2 Projections Drive Optimism
On April 29, NIO reported blockbuster performance in the first quarter, with both revenues and gross margins delivering strong year-over-year performance.
The top line figures surged 484.1% year-over-year to RMB 8 billion and surpassed analysts’ expectations of RMB 7 billion.
Gross margins came at 19.5% versus negative 12.2% in the year-ago quarter. The huge improvement in gross margins indicates the strength in the company’s fundamentals and was a definite eye-opener for investors.
NIO CEO William Bin Li said, “In light of the strong momentum under a volatile macro environment, we expect to deliver 21,000 to 22,000 vehicles in the second quarter of 2021.”
Li added, “To ensure sufficient production capacity for our upcoming products, together with our partners, we have kicked off the planning and building of a new plant in Xinqiao Industrial Park in Hefei.”
These encouraging words from the CEO were enough to boost the sentiments of NIO investors.
Wall Street’s Take
Consensus among analysts is a Strong Buy based on 8 unanimous Buys. The average NIO price target of $61.91 implies 25.3% upside potential from the current levels.
On June 1, Morgan Stanley analyst Tim Hsiao reiterated the stock’s price target of $64 (29.6% upside potential) and a Buy rating.
The analyst expressed optimism about Nio’s future growth, saying, “We think supply dynamics will stay fluid but have been improving; this, together with sales channel expansion and growing order backlog, bodes well for volume take-off in 2H21.”
Key Metrics
NIO scores a 9 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
TipRanks data shows that financial blogger opinions are 82% Bullish on NIO, compared to a sector average of 72%.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
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