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Nio Earnings Surge despite Crackdown on Big Tech

Established in 2014, Nio (NIO) has come a long way to become one of the leading EV manufacturers in China. The company has seen a steady rise in demand for its luxury SUVs in 2021. Additionally, Nio has witnessed a doubling of its car sales in 2020 and is focusing on developing its battery technology and introducing newer EV models. 

The company does not manufacture electric cars. Rather, it has partnered with a state-owned car manufacturer. This has provided Nio with an asset-light business model, allowing Nio to focus on technological development and design, much the same way as other high-profile companies such was Apple (AAPL).

This extraordinary business model has resulted in otherwise stellar earnings. Nio’s recent Q2 results highlighted how successful this Chinese EV player has been. The company updated its forward revenue guidance, and announced plans to battle the rising competition from domestic and foreign rivals such as U.S giant Tesla (TSLA).

Nio’s stock fell after China’s Communist Party’s Central Committee declared a 5-year plan for increased regulation. Indeed, all Chinese growth stocks fell on this news. While the CCP had earlier imposed a series of regulatory curbs on its tech start-ups, investors are increasingly trying to decide how the future regulatory environment may look for Chinese stocks in this environment.

Accordingly, Nio is an intriguing stock to assess today. This author is bullish on the stock. Let’s dive into whether this is a worthwhile stock for investors consider a long-term growth investment today. (See Nio stock charts on TipRanks)

Nio Earnings in Q2

Starting with the top line, things are looking up for EV player Nio. The company reported a massive year-over-year revenue jump of 145% in the second quarter. Experts believe that the Chinese EV sector may not be as affected by the recent regulations as much as the other sectors. If true, this implies more upside for NIO stock relative to other high-profile Chinese tech companies.

On the bottom line, Nio also outperformed. The company posted a loss of $0.09 per share, relative to a $0.17 loss during the previous quarter last year. While still losing money, Nio appears to be trending in the right direction, and could head into the black shortly.

Nio’s deliveries ended up coming in near the higher-end of the company’s previously-estimated range of 21,000-22,000 vehicles. The company reported deliveries of 21,896 units of its luxury electric vehicles this past quarter. These delivery numbers were stronger than many expected, given difficult headwinds caused by a global chip shortage and increased competition.

Nio has stated that its July sales in the current year have more than doubled in comparison to last year. Accordingly, the company aims to sell 23,000 to 25,000 EVs during the next quarter, which would be 88%- 105% more as opposed to last year. 

These numbers are very strong, and represent the kind of growth investors expect from a company with this sort of valuation.

Nio Aims to Expand in Norway

Chinese EV manufacturers have already started to make inroads into Norway. Why Norway? Well, it is a major EV market in Europe, with much higher adoption rates than other sub-regions in Europe. EV makers like Nio, BYD Auto (BYDDF), Li Auto (LI), and others are planning to enter the Norwegian EV market, which is otherwise dominated by Tesla. 

Nio has already shipped its first batch of its ES8 luxury electric SUVs to Norway. Nio’s expansion to foreign markets is a bullish sign for investors looking past China. Though China is a massive, fast-growing market, Nio is clearly making a move to become a global leader in the EV race. Long-term investors ought to like this move. 

Nio to Launch a Series of New Models 

Currently, Nio manufactures a lineup of luxury electric SUVs, including its ES6, EC6, and ES8 models. Founder and CEO William Li has announced that the company would be introducing its first electric sedan ET7 next year. The EV maker plans to launch three new models in the upcoming year, including its ET7 sedan. 

What are the Analysts Saying about NIO Stock?

According to TipRanks analyst rating consensus, NIO stock is a Strong Buy. Out of 7 analyst ratings, there are 7 Buy recommendations.

The average analyst Nio price target is $66.01, implying an upside of 63.6%. The analyst price targets range from a low of $57 for each share to a high of $72 per share. 

Bottom Line

Nio has constantly been trying to develop new battery technologies to get an edge over its competitors. Moreover, it is also working on creating a new battery swapping service that would allow users to swap exhausted batteries with a fully-charged one.

With newer EV models, overseas market expansion, and key innovations, Nio is poised to grow. This is a top growth stock every long-term investor should at least look at today.

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

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