Understand Why Nio Shares Have Skyrocketed Today



As of 11 a.m ET on Monday, shares of Nio (NYSE:NIO) had skyrocketed, increasing by more than 10.3%.

According to a market expert who follows the Chinese electric vehicle (EV) sector closely, Nio (NYSE:NIO) shares are poised to double in value over the next 12 months on the strength of two major growth drivers. Today, investors are buying Nio stock in droves due to the company’s potential for a 1,000% return on investment.

What’s the Reason

According to The Fly, Edison Yu, an analyst at Deutsche Bank, thinks Nio (NYSE:NIO) has a chance to become the industry leader among electric vehicle startups for two reasons.

Given the positive response from customers and Nio’s attempts to increase production to meet demand, Yu believes the company’s ET5 sedan will quickly become a best-seller among luxury EVs.

Nio’s first batch of its midsize vehicle, the ET5, will be shipped out on September 30. According to CnEvPost, a Chinese website specializing in new energy vehicles, Nio (NYSE:NIO) has received approximately 200,000 preorders for the car. Several Chinese news outlets had drawn parallels between the initial demand for the ET5 and the rush to buy a Tesla Model 3 when it was released in China in 2020.

Second, Yu is optimistic about Nio’s future because of its consistently high sales of previous models. According to Yu, Nio’s existing goods continue to record consistent sales, suggesting strong brand strength and service, despite being older and more costly models (Nio is now focusing on low- and midrange automobiles with a mass-market brand in the works as well).

To put that in context, Nio (NYSE:NIO) shipped 25,059 EVs in its second quarter. Even though Nio’s premium ET7 sedan, the first of which was delivered in March, accounted for one-fourth of the company’s sales volumes, the remaining three models were all introduced by Nio between 2017 and 2020.

Yu recommended Nio as the best Chinese EV stock and predicted a $39 price for each share.

What’s Next?

What really mattered about Nio’s financial report for the second quarter, which was released last week, wasn’t the figures. Nio will be pretty busy for the remainder of this year.

For instance, in August, Nio began delivering its first mid- to large-sized SUV, the ES7, and last week at Nio’s second-quarter earnings call, management said that ES7 orders were exceeding forecasts. The first ET7 sedans were sent to Europe in August, and they should play a significant role in expanding Nio’s profit margins in the months and quarters to come.

According to company executives, the ET5 sedan is set to enter mass production at Nio’s new factory in NeoPark. Nio anticipates record monthly total deliveries as it ramps up manufacturing and distribution of the ET5.

Featured Image – Megapixl © Andreistanescu 

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About the author: I'm a financial journalist with more than 1.5 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.