NIO (NASDAQ: NIO) has been a star performer in the market in 2020. However, recently it has fallen sharply from its recent highs. So, is NIO a good stock to buy? The future of the electric vehicle market is more evident than ever before. Nio Stock has justified and proved itself as one of the leading EV brands in the world. Should you buy Nio on the downside for the long-term?
5 Reasons to buy NIO stocks
NIO stock has shown growth over the past year, and it has pretty excessively supported the stock price during the period. Furthermore, it has integrated into a vast automobile marketplace and has made its ecosystem of a sustainable industry which is much needed right now.
Recently, the Chinese EV marker reported the four-square sales, which soared up to 150% year-over-year to $1.02 billion. At the same time, the vehicle margin during the quarter jumped to 17.2% from -6%.
So, let’s watch out for the reasons to buy NIO stock.
Nio’s New ET7 EV Will Likely Accelerate the Company’s Sales Growth
The Chinese EV giant revealed its ET7 electric SUV early this year. The SUV is expected to be fully autonomous, with a milage of 620 miles on one charge. The SUV will also come up with another version that can drive up to 435 miles per charge.
ET7 will be one of Nio’s decorated SUVs with one ultra-long-range LiDAR unit, 11 eight-megapixel cameras on board, 12 ultrasonic sensors, five millimeter-wave radar cameras, and two positioning units. ET7 has some other prominent features and is set to help the NIO sales radar boom. The ET7, with a range of 435 miles, is expected to be sold for $78,000.
NIO stock is fundamentally undervalued.
NIO is fundamentally undervalued at the moment compared to the firm’s long-term earnings growth potential. The Chinese leading EV maker has been one of the leading in the market during 2020. with China being the largest auto market, Nio is well-positioned to enter the long-term profit-making line. Moreover, Nio is one of the few EV firms with the best battery technology out there.
Among Tesla Inc. and Lucid Motors, Nio is shining in battery making and brand equity. This means that Nio is anticipated to become an all-global brand by 2025. Nio has plans to expand its ecosystem in Europe and the USA shortly. So, following the forthcoming aspects of the EV maker, it’s pretty clear that Nio is undervalued.
According to Meet Luke Lango of investorplace.com, NIO is well on track to make $6 earning per share by 2030. This suggests that Nio could touch $70 in 2021 following a 25x forward earnings growth and a 10% annual discount rate.
The Need of EV industry more than ever before
The hype around the electric vehicle market is becoming a sweet reality for the world. We have seen many countries with the initiative to go green and produce zero-emission automobiles in the next ten years.
In that premise, Nio is among the top EV firms in the world that have strengthened its ecosystem and market. The growth of EV stocks last year was primarily based on the potential expansion of EVs. The fundamentals are strong enough to support the market in the long-term. The innovation in electric vehicles is starting to pick up the pace—in natural manners.
So, NIO stock lies on the verge of market growth that will help the stock grow in the future.
Nio Getting into the heads of premium Investors
In 2019, Nio faced a drought as the delivery trends suffered dramatically. This gave some investors an alarming signal that the company’s premium EV mindshare was small and slipping. But 2020 turned things around, and the investors got to see an exciting and emerging face of the Chinese EV maker. The robust demand for the ES6 and ES8 played a crucial role in Nio’s big pump last year.
Following that, in March and April of 2020, the deliverers rose 116.8% and 105.8% month-over-month, respectively. At the same time, the May deliveries skyrocketed over 215% year-over-year. This shows that investors are back at it and believe in the firm’s potential. With the sales delivery expected to grow, we would see investors jumping into the NIO stock.
Improving Gross Profit and Gross Margin
Things are starting to get better for Nio. In 2020, the growing deliveries helped in higher revenue which broke the loss barrier of 2019. Recently, Nio released its Q4 and full-year reports which showed that the gross profit was RMB1,141.9 million (US$175.0 million) in Q4 compared to a gross loss of RMB253.8 million in 2019. This reflects a whopping increase in Q4 gross profit of RMB1,395.7 million.
Whereas, for the full-year 2020, the NIO gross profit jumped to RMB1,873.4 million (US$287.1 million) compared to a gross loss of RMB1,198.8 million in 2019. The gross margin improved excessively with 17.2% in Q4 and 11.5% for full-year compared to a negative 8.9% and 15.3% in 2019, respectively.
Is NIO a buy or sell?
We have different analysts that have their perspectives regarding Nio’s price. On different factors, they are rating the stock as a buy or sell at the moment. Recently, we have seen Nio on a downward side, which means that most of the investors have sold Nio shares overall.
The average trading volume remains over 110 million, but this is when to buy the stock on a dip. According to marketbeat, NIO has received a consensus rating of Buy. The company’s average rating score is 2.59 and is based on ten buy ratings, seven hold ratings, and no sell ratings. Do you think, “is Nio a good stock to buy?” Well, the market suggests so.
NIO Stock Technical Analysis
According to MarketSmith chart analysis, NIO shares remain below the 50-day line after a failed breakout past a 57.30 buy point in February.
No stock found support at the 200-day line, which is a positive signal. The rebound occurred following a Reuters report that US-listed Nio could carry out a secondary listing in Hong Kong later this year. This could help Nio to support its expansion, attracting a new investor base. Currently, Nio stock is finding some resistance at its 21-day line.
NIO stock price history
Here is the timeline of Nio’s stock price between April 2020 and March 19, 2021, monthly
|Mar 19, 2021||41.44||43.40||40.44||43.35||43.35|
|Mar 01, 2021||48.55||50.42||31.91||43.35||43.35|
|Feb 01, 2021||59.07||64.60||41.66||45.78||45.78|
|Jan 01, 2021||51.20||66.99||49.08||57.00||57.00|
|Dec 01, 2020||52.02||52.10||38.43||48.74||48.74|
|Nov 01, 2020||33.95||57.20||31.68||50.53||50.53|
|Oct 01, 2020||21.68||32.20||20.60||30.58||30.58|
|Sep 01, 2020||19.45||22.59||15.61||21.22||21.22|
|Aug 01, 2020||12.53||20.97||12.46||19.03||19.03|
|Jul 01, 2020||7.79||16.44||7.67||11.94||11.94|
|Jun 01, 2020||4.00||7.90||3.96||7.72||7.72|
|May 01, 2020||3.30||4.20||3.08||3.98||3.98|
|Apr 01, 2020||2.63||3.98||2.22||3.41||3.41
NIO stock price target
We have seen many EV stocks that have corrected in early 2021 following a super bullish run in 2020. Nio was continuing the rally until mid-Jan 2021 when the EV maker shares started to tumble. In no time flat – 36 days of trading to be exact – NIO stock had gone from a 52-week and all-time high of $66.99 to a 2021 low of $31.91.
However, NIO has regained after losses during the time period. As of now in the pre-market, Nio shares are trading at $44.32 up by 2.24%. With NIO’s rise back many analysts believe that the stock is expected to rise between $60 and $70.
In the current situation, the long-term investors may find this dip as a nice buying opportunity for NIO, based on the fact that Wall Street analysts remain bullish. There is a median 12-month price target of $57.57.
Nio Rival Electric Car Stocks
Nio has rising competition in the market. Tesla Inc., which is the leader of the EV market has started to expand its network in China. Along with it, Nikola Inc., Li Auto, and Xpeng are the Chinese EV companies that are up against NIO.
The competition is immense and Nio has to cope up with the growing market rivalry. In January, Tesla launched its made-in-China Model Y, a slightly cheaper rival to Nio’s new EC6 electric crossover. In late March, Volkswagen will begin delivering the far-cheaper, made-in-China ID.4. So, we can see how other EV makers are coming into the picture against Nio’s marketplace in China.
However, NIO has its own significance as it has a lot of expanding capacity in China and is looking to launch in Europe later this year is a big edge for the company.
NIO Earnings and Fundamental Analysis
When we look into the key earnings and fundamental factors, Nio lags. The Chinese EV maker is a young and fast-growing company. Things are getting better and we have seen the reflection of Nio’s robust growth in 2020.
On March 1, Nio delivered a wider-than-expected loss for the fourth quarter. Moreover lost $0.14 per share as revenue more than doubled to $1.02 billion. While the margins expanded over the quarterly period and earnings remain elusive, losses are narrowing.
The quarterly and full-year reports depicted a positive image of the company in the coming period. The increase in deliveries and gross profit shows that Nio is lowering its net loss.
Nio stock earns an EPS Rating of 51 out of 99, and an SMR rating of D, on a scale of A+ to a worst E. The EPS rating compares a company’s earnings growth against other companies. The SMR Rating reflects sales growth, profit margins, and return on equity.
In 2021, on average, analysts expect Nio to cut off its losses to $0.41 per share from $0.66 per share last year. The rising revenue is anticipated to rise up to $5.23 billion this year, which can take the earnings growth to 75% by 2022.
NIO stock forecast
The NIO Inc. price started in 2021 at $48.74. Today traded at $43.35, so the price decreased by -11% from the beginning of the year. For this year, Nio’s price is expected to end at $56.88, which will reflect a year-over-year change of 17% rise. In the long-term period, let’s have a look at the forecast of Nio’s share price.
NIO forecast 2025
According to the latest long-term forecast for Nio, the shares are expected to reach $156.76 by mid-year in 2025 and close the year at $170.87. This will show a rise of 294% from today’s price.
NIO forecast 2030
Nio is anticipated to reach $235.03 by mid-year 2030 and close the year at $240.56. This will reflect a rise of a whopping 455% from today’s price.
Currently, Nio (NIO) is shaping up to enter the phase it will really begin its rise in real terms. 2021 will be a defining year for the Chinese EV maker and how it plans to integrate into the European and US marketplace.
Is Nio a stock to buy? Analysts see NIO as a decent stock among the other EV stocks. With a strong future outlook, investors can make big bucks from Nio.