What happened
Nio (NIO +9.82%) stock exploded this morning and was trading nearly 10.3% higher as of 11 a.m. ET Monday.
An analyst who closely tracks the Chinese electric vehicle (EV) market just singled out the hot stock as his top EV pick in China and sees Nio shares doubling in value over the next 12 months, backed by two big growth catalysts. The prospect of doubling their money has investors loading up on Nio stock today.
So what
Deutsche Bank analyst Edison Yu has two reasons why Nio could outperform and emerge as the leader among EV start-ups, according to The Fly.
First, Yu expects Nio's ET5 sedan to rapidly become a top-selling premium EV given the initial customer response to the car and Nio's efforts to boost production to meet demand.
Nio will deliver the first batch of its mid-sized sedan, the ET5, on Sept. 30. Nio has reportedly received nearly 200,000 preorders for the sedan, according to China-based new-energy-vehicle website CnEvPost. Local Chinese media has even compared the frenzy in ET5 orders with that of Tesla's Model 3 when it was first delivered in China in early 2020.
The second factor that excites Yu about Nio's prospects is stable sales volumes from existing models. Yu points out how despite being older and more expensive models (Nio is now focused on low- and midrange cars with a mass-market brand in the pipeline as well), Nio's existing products continue to clock steady sales, indicating strong brand power and service.
For perspective, Nio delivered 25,059 EVs in its second quarter. Although a quarter of the sales volumes came from its premium ET7 sedan, which was first delivered in March, the remaining came from three models that Nio launched between 2017 and 2020.
Yu picked Nio as his top Chinese EV stock and posited a price target of $39 per share.
NYSE: NIO
Key Data Points
Now what
Nio's second-quarter earnings release last week was crucial, and it wasn't the numbers that stood out. Nio has a lot on its plate for the second half of the year.
For example, Nio started delivering its first mid- to large-sized SUV, the ES7, in August, and during Nio's second-quarter earnings call held last week, management said orders for the ES7 were exceeding expectations. Also, Nio shipped out its first batch of ET7 sedans to Europe in August, and the car should play a crucial role in boosting Nio's margins in the coming quarters.
As for the ET5, Nio's management revealed the company is already on track to start mass production of the sedan at its new plant in NeoPark. As it scales up production and deliveries of the ET5, Nio expects to hit record total deliveries every month in the fourth quarter.
