Is Nio Stock Worth Buying In June?
NIO) is a Chinese electric vehicle (EV) company and
has been producing five, six, and seven-seater electric SUVs and
electric sedans. While its recent earnings numbers for Q1 of 2022
got mixed reactions, the sector as a whole is primed to do
Increasing levels of global
warming have been the primary driving force behind the rising
adoption of EVs. High oil prices and rising inflation levels have
also played their part in recent months.
Like many other EV companies, Nio
stock was also trading in the exchanges at an inflated valuation
driving share prices lower in the last year. Nio is considered a
challenger to Tesla (NASDAQ: TSLA), but it is currently trading 70% below all-time
highs valuing the company at a market cap of $34
China’s zero-COVID policy led to the closure of many
factories. But recently, the Chinese government intends to ease
these restrictions to revive its economy. China is offering several
incentives for electric vehicle buyers.
The government provides
$1,500 to help people switch to electric vehicles.
Moreover, in 2020 governments across the world had already
spent $14 billion
as incentives for purchasing EVs,
representing a 25% year-on-year growth.
Nio holds a significant position
in the Chinese EV industry and is in a prime position to improve
market share going forward.
So, is the Nio stock worth buying
A look at Nio’s Q1 results
Earlier this month, Nio reported
its quarterly results for Q1 of 2022, which received mixed
reactions from investors. The market was impressed by the company’s
improving production capabilities. Nio delivered 25,768 vehicles in
Q1, a quarterly record. It has now delivered 200,000 vehicles
to date since it kickstarted production in 2018.
Quarterly revenue came in at
$1.56 billion, up 24.2% year-over-year. The gross margin, however,
decreased to 14.6% compared to 19.5% recorded a year ago. Besides,
there was a massive 295% increase in its net loss, which stood at
$281.2 million. The increase in selling, general, and
administrative expenses and the research expenses were the factors
that had led to such an increase in the losses.
An innovative approach is key to NIO stock
Innovation is the key to success,
and Nio’s innovation makes it one of a kind. For example, the
company’s recently introduced flagship electric sedans have a range
of 621 miles on a single charge. In addition, Nio’s
battery-as-a-service subscription product offers buyers a discount
on vehicle purchases and charges, swaps, and the upgradation of
batteries, which should improve customer loyalty.
Nio is recently trading at
$20.11, and Wall Street has a 12-month average price target of $40,
which is an upside of almost 100%. Analysts remain optimistic about
Nio as they expect sales to rise by 67.3% year over year to $9
billion in 2022 and by 69.7% to $15.3 billion in 2023. While still
unprofitable, Nio is forecast to narrow its loss per share from $1
in 2021 to $0.13 in 2023.
Nio is a prominent player in
ChinaU+02019s EV market and is heading towards grabbing a more
significant market share. Earnings fluctuations like this are
common for growth stocks, and Nio has the potential to become one
of the biggest winners over the coming years. NIO stock is still
cheap, so if you want to dive into the largest EV market, you
should consider adding Nio to your portfolio.
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