Stock Analysis & Ideas

Nio: What’s Ahead After Impressive May Deliveries?

Story Highlights

The expected ramp-up in production, new product launches, and easing of supply headwinds indicate better days ahead for Nio. 

The industry-wide supply shortages, production headwinds, and challenges from the COVID-19 pandemic took a toll on Nio’s (NYSE: NIO) financials and production. 

Nevertheless, the Chinese EV maker delivered 7,024 vehicles in May 2022, up from 6,711 in the prior-year period. This also compares favorably with April numbers, wherein deliveries fell by more than 28%.  

What’s Next?

Nio’s vehicle deliveries came back on track, and the company remains upbeat about ramping up its production capacity further. Moreover, Nio expects deliveries to accelerate due to the easing of COVID and supply challenges, and strong demand. 

As things are looking up for Nio, Mizuho Securities analyst Vijay Rakesh sees supply-chain pressure to ease and return to normal, which is positive. 

Rakesh stated, “We believe NIO could see its production back to pre-shutdown levels potentially in early June, as May production is already better week by week with Shanghai re-opening.” He is bullish on Nio, while his price target of $60 represents 241.5% upside potential.

Production ramp-up and improving supply-chain environment bodes well for growth. Further, Nio could also benefit from expansion into new European markets. Moreover, new model launches, including a mass-market brand, will likely support its growth. 

Bottom Line

Nio would gain from the increased adoption of EVs around the world. Moreover, the company’s strong competitive positioning in the Chinese market augurs well for growth. Overall, the improving operating environment (including recovery in deliveries, production ramp-up, and easing of supply headwinds) and new model launches could support its financials and stock price. 

Nio stock also has positive indicators from hedge fund managers. ARK Investment Management’s Catherine Wood and GMT Capital Corp’s Thomas E. Claugus opened a new position in NIO. Further, two more managers, including Ray Dalio, increased their holdings in NIO.

NIO stock has received 13 unanimous Buy recommendations for a Strong Buy consensus rating. Moreover, due to the recent pullback, the average price target of $41.48 represents 136.1% upside

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