Again in early June, after the Nio (NYSE:NIO) share price had popped from $2 and alter to $5.50, I predicted that Nio stock nonetheless had loads of room to maintain operating. In some way, I suspected that the corporate would stay in hyper-growth mode for some time longer.
Amazingly, on Oct. 2, the Nio stock price closed at an eye-popping $21.18. Whereas I projected some share-price development, I received’t declare to have identified in June that the stock would catapult above by early October.
The obtainable knowledge actually paints an image of a fast-developing electrical car producer. Consequently, I wouldn’t suggest making an attempt to short-sell Nio stock. That might simply be foolhardy because the share price may carry on transferring larger based mostly on market hype and enthusiasm.
As for potential long-side buyers, there’s no going again now. We are able to’t flip again the clock and purchase Nio stock at $5 and even $10. All we will do is assess whether or not the risk-versus-reward profile is favorable at this level. This, then, would require some technical evaluation.
A Nearer Have a look at Nio Stock
Despite the fact that Nio stock shed 2.67% on Oct. 2, the share price nonetheless remained up a heart-pounding 427% on a year-to-date foundation. This makes the share-price surge I wrote about in June appear quaint as compared.
With that, Nio stock didn’t solely obtain its 52-week excessive in October. It reached its all-time excessive, far exceeding any price level within the stock’s historical past.
That is likely to be thrilling for merchants preferring to deal with momentum. Alternatively, the melt-up within the Nio stock price may trigger concern amongst contrarians and buyers preferring value over exuberance.
And certainly, it’s troublesome to search out deep value in Nio stock in the meanwhile. In case you can consider it, the stock’s trailing 12-month earnings per share is -$44.10. That’s on a stock which trades at $21 and alter. It’s in all probability not a great signal.
On the opposite facet of the coin is Nio’s current efficiency, not as a stock however as an organization. Viewing issues from that angle, the argument turns decidedly bullish.
The corporate’s enchancment can greatest be expressed via Nio’s freshly launched vehicle supply figures. Specifically, for the month of September, Nio delivered 4,708 autos. That signifies a 133.2% improve on a year-over-year foundation.
Furthermore, Nio delivered 12,206 autos throughout the third quarter of 2020. That represents a 154.3% year-over-year enchancment. It’s additionally above the upper finish of Nio’s steering for the third quarter.
The spectacular development in Nio’s car deliveries was doubtless a consider Deutsche Bank analyst Edison Yu’s choice to reiterate his “buy” score on Nio stock. Together with that, Yu maintained his upbeat price goal of $24.
Getting Forward of Itself
Even with the optimistic score and price goal on Nio stock, Yu appears to concede that the corporate continues to face stiff competitors from its friends.
“The main push back we received on our bullish view is NIO’s brand does not create the same level of excitement and loyalty in China that Tesla or the German luxury auto makers command,” commented Yu.
He’s making an necessary level there. As noteworthy as Nio’s enchancment has been, the corporate merely doesn’t have the dimensions, the capital or the identify recognition of electrical car behemoth Tesla (NASDAQ:TSLA).
Certainly, I’d suspect that the Nio stock price has gotten forward of itself as a result of some shareholders are wagering that Nio would be the subsequent Tesla. But, this would possibly or may not occur.
Nio remains to be a tiny firm. In comparison with the efficiency of another automakers, 12,206 car deliveries throughout a full quarter is small potatoes. Nonetheless, long-side merchants have bid the share price as much as the excessive heavens based mostly on the belief that Nio’s development will proceed on its present trajectory.
The Backside Line
As an automaker in hyper-growth mode, Nio would possibly reside as much as merchants’ expectations and proceed to ship extra record-setting quarters.
Nonetheless, that assumption of success has, I consider, largely been priced into Nio stock already. I’m nonetheless rooting for the corporate to succeed, however value-focused buyers ought to watch for the share price to return again right down to earth earlier than leaping into the commerce.
On the date of publication, David Moadel didn’t have (both immediately or not directly) any positions within the securities talked about on this article.