Nio Stock Is Priced to Deliver Upside to EV Investors

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Chinese EV-maker Nio (NYSE:NIO) had a horrible 2019, followed by a turnaround in fortune in 2020 that saw shares surge in value. After slumping to the $1.50 range in fall 2019, the second half of 2020 saw massive growth. That culminated with an all-time high close of $66.99 in January 2021. However, NIO stock has dropped since then and currently trades at $37.87 as of midday April 7 2021. That’s despite a series of record EV deliveries and the announcement of its first-ever sedan in January.

Source: Sundry Photography / Shutterstock.com

What’s up with the recent dip in NIO stock? Despite dropping in recent weeks, it has an “A” rating stock in Portfolio Grader. This suggests the current price represents an attractive investing opportunity, and not a warning of a return to bad times for Nio.

Why NIO Shares Have Stumbled Recently

There have actually been two notable dips in NIO stock over the past six months, each with a different catalyst.

The first kicked off at the end of November 2020. After an impressive run, NIO shares closed at a then-record high of $55.38 on Nov. 23. Then they went into a steep slide, dropping below $40 in mid-December. What happened? The big concern was the law that threatens to de-list Chinese companies from American exchanges if they fail to comply with U.S audit standards. 

That panic subsided. It remains an issue, but since companies have three years to comply, it’s not a short-term threat.

The bigger and more recent slump began on Feb. 10. There have been the usual concerns that Tesla (NASDAQ:TSLA) is gaining ground in the Chinese EV market. In January Tesla started delivery of its Model Y compact crossover in China — a vehicle that’s expected to put pressure on Nio. However, the bigger factor has been something less specific to Nio; the company was caught up in the broad sell-off of technology stocks.

What the Analysts Are Saying About Nio

Generally speaking, investment analysts are feeling bullish about Nio’s prospects, but some remain cautious. Among the 18 polled by CNN Money, the consensus is that NIO stock is a “Buy,” although with six holdouts rating it as “Hold,” the positive take is not unanimous. Their median 12-month price target of $62.67 offers investors a tempting 65% upside.

Over the past several months, analyst coverage of Nio has reflected the CNN Money poll. It leans toward positive, but is countered with the occasional downgrade.

For example, on Dec. 1, Goldman Sachs upgraded its position to “Hold” from “Sell.” Citing the success of Nio’s battery-as-a-service strategy, Goldman Sachs analysts also increased their 12-month price target for NIO stock to $59. In January, the stock was on the receiving end of a downgrade from Citi, which cut its rating to “Neutral.” Despite the downgrade, Citi actually boosted its price target for NIO to $68.30 based on the sales potential of Nio’s new ET7 sedan. Several weeks ago, Mizuho initiated coverage of NIO, with a $60 price target and a “Buy” rating.

Bottom Line on NIO Stock

An investment in Nio isn’t just backing a company, its products and its strategy. It’s also an investment based on the future of electric vehicles. If you want to hedge your bets, invest in the surging EV market without picking a specific automaker — there’s a great way to do so. Consider battery stocks. That way, no matter which EV automakers ultimately come out ahead, you’re benefiting from the move to electric cars. 

However, I feel that Nio is in a very strong position, and that NIO stock is going to rally in 2021. It has growth stock written all over it. With shares down, now is a prime opportunity for EV investors to add NIO shares to their portfolio.

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On the date of publication, Louis Navellier had a long position in NIO. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.