NIO stock rose last week: should I buy now?

Last week, NIO stock rose 6.7%, climbing above the $30 mark. Dylan Hood takes a look to see whether he thinks this is a buying opportunity.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Blue NIO sports car in Oslo showroom

Image source: Sam Robson, The Motley Fool UK

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

NIO (LSE: NIO) stock climbed last week, rising just under 7%. The main reason for this was some bullish electric vehicle (EV) coverage by Macquarie analyst Erica Chen. Essentially, she said that she believed investors should be buying EV stocks. She also assigned a price target of $37 for NIO stock, which is over 20% higher than its current trading levels. Investors seemed to have heeded this message, pushing the shares to over $30 at the close of the week.

In addition to this, NIO’s corporate communications chief released a statement highlighting the $69,700 average sale price for December. Only Mercedes Benz had a higher average price than this in China, highlighting NIO’s presence in the market.

Where next?

Chen also shared her belief that the EV manufacturer’s sales would grow at roughly 50% annually for the next few years. NIO sold 91,429 vehicles in 2021, up 109% year-on-year. For context, Tesla sold just under one million vehicles in 2021. Growing at 50%, it would take NIO six years to reach such numbers, which seems encouraging to me.

NIO has proven itself to be capable of fast growth too. For example, 2021 Q3 deliveries rose 100% year-on-year, reaching 24,439. The fact that the firm has been able to deliver these high-growth numbers gives me confidence that it will deliver more growth moving forward.

Headwinds for NIO stock

The biggest risk I see for NIO stock in the short term is the continuing threat of covid-19. Causing huge supply chain issues, it has continually hindered NIO’s performance. For example, in October, deliveries fell 65% due to supply problems. With new variants increasingly cropping up, this could place a lid on its growth moving forward.

Medium term, I think that the current macroeconomic environment could put pressure on NIO stock. Fiscal stimulus — used by governments to ease the pandemic’s economic effects — has created a wave of high inflation, which central banks are now combatting by raising interest rates. When this happens, equities are usually pressured, with growth stocks like NIO being hit the hardest.

Over the long term, competition is likely to be a risk too. Ford and General Motors are just some of the household vehicle names that are pouring billions into EV production. NIO will have to fight off these better-equipped, more established firms if it wants to retain its presence in the market.

The verdict

Overall, I think that the current price level could offer a great entry point to add more NIO shares to my portfolio. The fact that top-level analysts are reiterating this message also gives me confidence. There are headwinds that it needs to overcome, but for me, the explosive growth and current low share price outweigh these. As such, I would consider buying more stock for my portfolio today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Dylan Hood owns shares of Nio. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

This 9.75% yielding FTSE 100 share is a total no-brainer for second income

This FTSE 100 insurance company is an absolutely brilliant source of second income and Harvey Jones reckons it will be…

Read more »

Dividend Shares

I could make £14.2k of passive income from £99 a week with this secret sauce

Jon Smith explains why sacrificing the immediate reward of dividends today can boost his long-term passive income prospects.

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Which looks the better bank buy right now: Lloyds or NatWest shares?

Lloyds shares are a very popular pick among FTSE 100 investors, but I think there are several better choices overall,…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,000 in savings? Here’s how I’d target a £14,616 annual passive income with M&G shares!

Big passive income can be generated over time with 9.5%-yielding M&G shares, especially if the dividends paid are used to…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

If I’d put £1k in this FTSE 100 stock five years ago, here’s how much I’d have now!

Mark David Hartley works out what sort of profit he’d have made by investing in this FTSE 100 pick pre-pandemic.…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

After crashing 50%, is now the perfect time to buy this world-class FTSE 250 share?

The worst-performing share on the FTSE 250 over the last year is also the most exciting one of all. How…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: July’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

Is this one of the FTSE 100’s best-value growth shares?

Looking for great-value recovery shares to buy today? Based on City forecasts, this could be one of the best that…

Read more »