Reasons behind the Rise of NIO Stock

Reasons behind the Rise of NIO Stock

NIO is a relatively young Chinese electric vehicle manufacturing company founded in 2014 in Shanghai. Although it makes well-made electric cars and SUVs, it is not NIO’s vehicles that made headlines in 2020. In fact, it is the stock price, which increased 1000% to $50 a share, due to the $1 billion injection from the Chinese government. As a part of its bid to become a global green superpower, China has promised that 25% of car sales by 2025 will be new energy vehicles and not purely fueled by petrol or diesel, which created a huge potential market for NIO.

NIO’s shares rose 65.2% in November, according to data from S&P Global Market Intelligence. This happened due to rumors of its quick entry to a new geographic market, a strong quarterly report, and gaining momentum for expanding to broader markets.

(Image credits: YCharts)

Third Quarter 

On November 3, InsideEVs reported that NIO is on track to enter the European market in 2021. Furthermore, NIO published its third-quarter earnings on November 17 topping the market's expectations. In its report, the company posted a non-GAAP loss per share of $0.12 on revenue of $666.6 million, while the average analyst estimate had targeted a per-share loss of $0.15 on sales of $628 million. Additionally, NIO delivered 12,206 vehicles in the third quarter, which resulted in the dipping of the stock shortly after the earnings release due to a sell-off for the broader market, although it quickly rebounded and set a new lifetime high. Surprisingly enough, NIO’s share price has dipped roughly 5% in December, despite the impressive number of vehicle shipments early in the month.


(Image credits: YCharts)


Fourth Quarter 

NIO is aiming to deliver between 16,500 and 17,000 vehicles in the fourth quarter with sales between $921.8 million and $947.9 million. This is ahead of Wall Street's targets with roughly 103% year-over-year at the midpoint of the target. Moreover, NIO is now valued at roughly $58.6 billion and is trading at approximately 24 times the expected sales for this year.

To Sum Up

Auto stocks, mainly stocks of electric vehicle manufacturers, have been some of the top-performing stocks in the market in 2020. This is despite the industry’s bumpy road this year. Likewise, analysts declare that NIO's fundamentals are on a positive track. It is expected that revenue will double to more than $32 billion in 2021. Additionally, Bank of America has a "buy" rating and $54.70 price target for NIO’s stock.

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