What happened
Nio (NIO 2.45%) stock is off to a strong start this week and extended its gains from Monday through today -- the electric vehicle (EV) stock was trading up 1.8% as of 12:25 p.m. ET this afternoon. An important update from China could be fueling the stock price today.
So what
One big concern that weighed heavily on Nio shares since December last year was the potential threat of delisting from the U.S. stock exchange under the Securities and Exchange Commission's (SEC) scrutiny. Although the SEC's audit rules apply to all foreign companies listed in the U.S., Chinese stocks face a bigger risk given China's disregard for U.S. regulations so far.
Image source: Getty Images.
This morning, a report from the South China Morning Post hinted at a possible solution to this problem and stated that the China Securities Regulatory Commission is reportedly planning a "new approach" to break the multi-year deadlock on accounting standards between the U.S. and China.
Although Nio already listed its stock in Hong Kong earlier in March after the threat of delisting from the U.S. deepened, a truce between China and the U.S. would be a huge boost to investor sentiment in the EV stock.
Importantly, this comes around the same time that Nio is pushing forward with big growth plans. Nio started deliveries of its flagship ET7 sedan on March 28 as planned, and has said orders for the sedan are "much more" than the media's projection of around 15,000 units. Nio also confirmed it'll launch and deliver the SUV ES7 and midsize sedan ET5 this year, and will enter several European markets this year.
At its latest fourth-quarter earnings conference call, Nio also revealed how it's tackling supply chain constraints and expects to spend huge sums of money in 2022 on new products and technologies.
Now what
Nio stock received at least two analyst downgrades yesterday driven primarily by supply and cost challenges. Mizuho lowered its price target to $60 a share, and Nomura cut its price target to $51.50 per share.
Yet those price points still represent solid upside from Nio stock's Monday closing price of $21.21 per share, meaning most analysts believe the company has strong potential in the long term. With Nio now also expecting to turn profitable sooner than what most investors and analysts thought, I'm not surprised to see some buying activity in the stock today.
