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Why NIO Stock Is Surging Today

By John Rosevear – Updated Jul 20, 2020 at 11:38AM

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After a 25% decline last week, the stock was sharply higher on Monday.

What happened

Shares of Chinese electric-vehicle maker NIO (NIO -3.87%) resumed their upward charge on Monday morning. The stock declined more than 25% last week amid notes from Wall Street analysts urging investors to be cautious. 

But investors appeared to have thrown those cautions to the wind on Monday morning. As of 11:15 a.m. EDT, NIO's American depositary shares were up about 10.6% from Friday's closing price. 

A white NIO ET7, a sleek upscale electric sedan.

NIO's next new model will be the ET7 sports sedan, due early next year. Image source: NIO.

So what

NIO -- the company and its shares -- has been on a tear over the last couple of months. After starting 2020 in a rough spot, perilously short on cash and reeling from the COVID-19 outbreak in China, things have turned around nicely for the plucky electric-vehicle company.

NIO addressed auto investors' liquidity concerns decisively, securing nearly $1 billion in cash from economic-development authorities in China's industrial Anhui province and an additional infusion from early investor Tencent Holdings (TCEHY -2.33%). And NIO's sales recovered nicely as the pandemic receded, resuming their growth trajectory and nearly tripling in the second quarter from a year ago. 

NIO's stock surged, rising over 200% from the beginning of June through July 10. But NIO's shares sold off last week, declining more than 25%, with at least one analyst warning investors that the company's share price price had run well beyond what was justified by its fundamentals. 

Was that the end of NIO's rally? Apparently not: As of late morning on Monday, last week's decline is looking more like a correction that may have passed. 

Now what

After that strong second-quarter sales result, NIO investors will be looking forward to the company's second-quarter earnings report. NIO hasn't yet announced a date for that report, but it's likely to happen in the second half of August.

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

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Stocks Mentioned

Nio Inc. Stock Quote
Nio Inc.
$17.64 (-3.87%) $0.71
Tencent Holdings Limited Stock Quote
Tencent Holdings Limited
$34.87 (-2.33%) $0.83

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