Nio (NIO) stock investors caught a windfall not long ago, but was it just a fluke? I’d say there’s still room for more gains in the final four months of 2024. I am bullish on NIO stock because the share price has been much higher and because Nio’s operational and financial data are undeniably positive.
Don't Miss Our Christmas Offers:
- Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
Nio is an electric vehicle (EV) manufacturer based in China. Admittedly, Nio must deal with multiple challenges, such as China’s uneven post-COVID-19 economic recovery. Furthermore, Nio faces tough competition, especially from rival Chinese automaker BYD (BYDDY) and, to a lesser extent, Tesla (TSLA).
However, fresh results suggest that the financial market has underestimated Nio’s growth potential despite these challenges. Just maybe, NIO stock is finally shifting out of neutral, and the buyers are now in the driver’s seat.
Are Slowing EV Deliveries a Concern for Nio?
The skeptics might point out that Nio’s EV delivery pace has slowed over the past three reported months. Yet, I would counter this by stating that the year-over-year percentage-wise growth has been impressive, and the critics are just nitpicking. This supports my bullish argument because strong overall EV delivery growth is a sign that Nio is successfully overcoming its challenges, such as fierce competition from BYD and Tesla.
So, here’s what you need to know. Nio delivered 21,209 vehicles in June, and then 20,498 vehicles in July, followed by 20,176 vehicles in August. Should this downtrend be a cause for concern? Not at all, as by the end of August, Nio had delivered a total of 128,100 vehicles year-to-date, up 35.8% year-over-year. That level of growth can’t just be dismissed.
Besides, from one month to the next, there will be fluctuations, and investors ought to expect this. It’s important to take a big-picture perspective when evaluating a company like Nio. There will be seasonal buying patterns and macroeconomic factors that Nio cannot control. Thus, there’s no need to nitpick and hunt for excuses not to buy NIO stock.
Nio Takes a Loss, but It’s Narrowing
The naysayers might also point to the fact that Nio is currently an unprofitable business. To that, I would counter that Nio is improving in that area, and I believe that improvement – not perfection – is the name of the game. This point supports my bullish thesis because a narrowing net loss shows that Nio can still make headway as a business even if its financials aren’t always 100% ideal.
It’s true that Nio incurred an adjusted net loss of RMB4.535 billion RMB, or $624.1 million, in 2024’s second quarter. On the other hand, Nio’s adjusted net loss decreased 16.7% year-over-year and 7.5% quarter-over-quarter.
Plus, there’s another way to evaluate Nio’s Q2-2024 bottom-line performance. Nio reduced its adjusted loss per American Depositary Share (ADS) to RMB2.21, or $0.30, from a loss of RMB3.28 per share in the year-earlier quarter. Meanwhile, the analysts’ consensus estimate called for a loss of $0.31 per ADS.
Nio Grows Its EV Deliveries, Sales, and Margins
Additionally, the profit-or-loss stats don’t tell the full story of Nio’s second-quarter 2024 results. Several other data points help to support my bullish outlook for Nio and for NIO stock. When you read these fiscal figures, you’ll be amazed that Nio stock isn’t much higher. For one thing, Nio generated revenue of RMB17.446 billion or $2.4 billion in Q2 of 2024. That’s up 98.9% year-over-year and 76.1% quarter-over-quarter, believe it or not.
The doubters might complain that this result fell short of Wall Street’s consensus estimate of $2.46 billion in quarterly revenue. However, $2.4 billion isn’t a wide “miss,” if we should even call it that. Frankly, it would be unreasonable to complain about 98.9% revenue growth. Since Nio’s revenue grew so rapidly, it makes sense that the automaker’s EV deliveries also grew. Specifically, Nio’s EV deliveries increased by a jaw-dropping 143.9% to 57,373. Would could possibly find fault with that?
Finally, Nio reported a Q2-2024 vehicle margin of 12.2%. That’s nearly double the company’s 6.2% vehicle margin from the second quarter of 2023. This further supports the idea that NIO stock deserves to be much higher than it is today.
Is NIO Stock a Buy, According to Analysts?
On TipRanks, NIO comes in as a Moderate Buy based on five Buys, four Holds, and one Sell rating assigned by analysts in the past three months. In addition, the average Nio stock price target is $6.06, implying 9.5% upside potential.
Conclusion: Should You Consider NIO Stock?
Nio stock jumped after the company released its Q2-2024 report, but there could still be plenty of room to run. The share price is still far below where it was one, two, and three years ago.
This seems unreasonable as Nio’s recently released EV deliveries and revenue are on an upward trajectory. In addition, Nio appears to be closing the profitability gap. Hence, the NIO stock rally might be far from over, and I would consider buying a few shares now.
