Please ensure Javascript is enabled for purposes of website accessibility

Why NIO's Stock Surge Is Continuing

By John Rosevear – Jul 8, 2020 at 10:56AM

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

Investors are excited, and they have good reasons to be.

What happened

Shares of Chinese electric-vehicle maker NIO (NIO 0.42%) continued their strong run on Wednesday morning. Shares were up about 10.7% from Tuesday's closing price as of 10:45 a.m. EDT, as investors continued to flock to NIO's stock following its strong second-quarter sales report.

So what

NIO is one of several companies in the electric-vehicle space that has seen a surge of investor interest in the wake of the huge run-up in Tesla's (TSLA 3.94%) share price in recent months. But NIO has a few things going for it that many of the others don't: It's shipping vehicles, its sales are growing, and it has money in the bank.

NIO's shares got a boost last Thursday, when the company reported that its second-quarter sales had nearly tripled from a year ago, exceeding even its own expectations. 

A blue NIO ES8, an upscale electric SUV.

A revamped version of NIO's flagship ES8 SUV, with more range and improved driver-assist systems, began shipping in April. Sales so far have been strong. Image source: NIO.

Not only did that sales report make clear that NIO (and its customer base) have largely recovered from China's COVID-19 outbreak, it showed that the company is now reaping the benefits of the sales network it spent so much money to expand in 2019.

But there's more to be excited about here. With plenty of money in the bank, thanks to cash infusions from longtime investor Tencent Holdings and economic-development authorities in China's industrial heartland, auto investors' longtime worries about NIO's liquidity have been put to rest, at least for the next few quarters. 

Now what

NIO's chief financial officer, Steven Feng, hinted last week that the strong second-quarter sales result had set the company up for a strong financial result as well. We'll find out when NIO reports its second-quarter earnings, likely sometime in mid-August.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tencent Holdings and Tesla. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.