NIO Stock Has Been On A Tear, Is It A Buy Now?
If you’re looking to buy the best electric vehicle stocks in the stock market today, you may consider watching NIO Inc. (NYSE: NIO). After notching a new record high of $66.99 in recent weeks, the high-flying stock quietly retreated to a favorable entry point. Some may identify it as a bull retracement pattern. Some simply consider it a fresh opportunity to buy at dips. Either way, NIO stock seems to be on track for another year of bullish momentum.
Chinese electric vehicle stocks have seen some slowdown in momentum in recent sessions. Now, NIO started the New Year with another record-high monthly delivery. NIO delivered 7,225 vehicles in January, representing year-over-year growth of 352.1%. This could act as a catalyst to potentially lift these top Chinese EV stocks out of this lackluster phase. For those who are unfamiliar with the EV space in China, the other two dominant players are XPeng (NYSE: XPEV) and Li Auto (NASDAQ: LI). Apart from NIO, Xpeng had also reported strong delivery numbers for January 2021. While Li Auto may have yet to announce their delivery numbers, NIO’s record monthly deliveries could likely create a strong tide that lifts all boats.
There’s no doubt it’s an attractive space to watch considering China is the biggest EV market in the world. In terms of addressable market opportunity, China is any EV manufacturer’s dream to tap on as part of their global expansion strategy. Tesla (NASDAQ: TSLA) enjoyed the first-mover advantage in China. And just last week, Ford Motors (NYSE: F) reported that they are making their Mustang Mach-E in China.
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NIO Is Your Big Play On China’s EV Market
At its core, the bullish case for NIO stock is somewhat straightforward. Investors have been looking for the ‘next Tesla’ stock to buy. Since April, NIO stock has seen sensational gains and has never looked back since. Analysts believe the global EV market will only go higher, and they believe NIO stock can capitalize in China in a similar fashion Tesla did in Western markets.
“China is a greenfield EV market opportunity for many well-positioned auto players as we believe overall EV sales can potentially double in the region over the next few years given the pent-up demand for EV vehicles from customers across all price points.” – Wedbush analyst Daniel Ives
Unlike Tesla, NIO faces not only direct significant competition from Xpeng or Li Auto but also 500 other electric vehicle manufacturers in China. However, thanks to its premium positioning in the China EV market, NIO has been reporting record delivery numbers of late. The company ended 2020 on a high, having delivered a record 43,728 vehicles for the year. It has been churning out record monthly numbers since August 2020.
Potential International Expansion In Europe Could Be A Catalyst For NIO Stock
So far, all of NIO’s sales have been in China. However, the EV industry website Electrek recently took NIO’s ES6 SUV for a spin. The portal further stated that the company is believed to be looking to market its vehicles in Europe. In addition, job postings also seem to indicate that NIO is finally breaking into Europe.
Rumored to be coming to Europe in 2021, it will be interesting to see how it competes against an abundance of German SUVs that are also entering the increasingly crowded segment. It’s still too early to say whether NIO could make a name for itself in Europe. Time will tell whether the NIO ES6 or the ET7 sedan will come and successfully conquer the European market.
According to an analysis from EqualOcean, NIO acquired a larger market share in December 2020. It nabbed 3.1% of the total, which is higher than 2.84% in November and 2.53% in December 2019. While still far behind Tesla’s and BYD’s, the market share gains represented a positive development. It could signal to investors that the ongoing trend is likely to continue in 2021 and beyond.
While the Hangzhou government’s strategy and NIO’s physical capacity boosts are certain catalysts for the company, Tesla’s progress in its Shanghai gigafactory is a risk that can’t be taken lightly. Not to mention, that the newly introduced restricted traffic control policies in Hangzhou could materially affect the sales figure.
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An EV Manufacturer That Actually Makes EVs
With increasingly new players entering the EV space through the special purpose acquisition company (SPAC) route, investors must differentiate those selling the dream and those selling the real deal on wheels. Any sophisticated marketer could pull up exciting ideas and prototypes to attract investors, but putting them into action? Not many. NIO’s huge gains in its stock price are not unwarranted. Its triple-digit percentage gains year over year have certainly impressed investors across the board.
Now that the company has delivered its first sedan model, it could potentially pull in an entirely new audience. If you really believe that NIO is the ‘Tesla of China’, would you say that the ET7 would benefit NIO stock as much as the Model S has benefitted Tesla? With the new battery pack and its notable ‘Battery-as-a-Service’ program, the idea of it challenging Tesla is not too far-fetched, isn’t it? Would a new sedan from NIO bring great value to NIO stock shareholders?
Now, NIO has reported another record-high for their monthly delivery numbers. Given its accelerated efforts to boost production in December, the numbers disclosed this morning may not come as a surprise. What’s more, the demand for EVs in China is likely to remain robust as the Chinese government wants about 25% of all new cars sold in the country to be electric by 2025. And this is expected to bode well not only for NIO stock but also for other EV players in China.
Despite the monstrous run-up and stretched valuations, there’s still a great chance NIO stock could continue its remarkable performance. After all, it would not be surprising if consumers in China are looking for a new ride for the new year. With so many resources under its belt, NIO has all the reasons to expand its lineup. Also, the company plans to introduce a new model each year going forward. This can potentially lead to an increase in NIO’s sales in the years to come as the demand for EVs increases. With the company’s long growth runway going forward, will you consider having NIO stock in your portfolio right now?