What happened
After a nearly 12% pop yesterday, Nio (NIO 0.38%) shares are on the rise again Friday morning. Overnight the Hong Kong-listed shares for the Chinese electric vehicle (EV) maker soared 20%, and its American depositary shares are keeping the rally going, up 9.5% as of 10:42 a.m. ET.
So what
Yesterday's rally came after the company reported its third-quarter results and gave investors an optimistic prediction for vehicle deliveries in the fourth quarter. Investors were also boosting growth and technology stocks yesterday after the October Consumer Price Index showed the rate of inflation slowed last month.
The move overnight in Hong Kong had an additional catalyst. China has announced an easing of its strict COVID-19 quarantine policy that has resulted in negative impacts on both production and consumer demand for Nio's vehicles.
Image source: Nio.
Now what
While its net losses continued to grow, investors focused on management's optimistic estimates for the fourth quarter yesterday. The third quarter was marred by COVID-19-related lockdowns that impacted production levels as well as consumer spending. But Nio sees deliveries in the fourth quarter jumping between 36% and 52% over the third quarter.
Mizuho analyst Vijay Rakesh reacted to the report by maintaining a buy rating on the stock. Though he lowered his price target from $40 to $34 per share, that would still be a gain of more than 300% from Thursday's closing price. Rakesh acknowledged the short-term challenges, but stated, "we believe Nio remains well-positioned with a multi-year EV adoption tailwind and market leadership in premium EVs in China," according to Barron's.
Now that the Chinese government has taken a step toward a more relaxed policy to manage the COVID-19 situation in China, investors may be more optimistic that the outlook management put forth will be achieved. That may make now a good time to buy Nio stock.
