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Nio Stock Is Undervalued as It Heads Into Q4 Earnings Today

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Nio Inc. (NYSE: NIO) stock hasn’t performed as well I hoped, don’t I’m not ready to tell you to give up on it just yet.

A Nio (NIO) sign and logo on a tan concrete building.

Source: Sundry Photography / Shutterstock.com

When I last wrote about Nio it was still early in the new year and I thought it would recover quickly.

“With impressive deliveries, and solid catalysts ahead, I’d like to see Nio stock again at $44.27, especially with governments all over the world pushing for millions of EVs,” I wrote.

Since then, shares of NIO dropped from about $29 a share to $21.87, but I’d use this weakness as an opportunity to buy in while the price is unnaturally low.

There is no shortage of reasons that the Nio comeback will be strong.

For one, there’s still plenty of demand for electric vehicles. Two, delisting fears were overblown. Three, the Chinese government is cooperating with U.S. regulators to create far more stability for overseas listings, which could put delisting fears to bed.

Better, the company has doubled its production capacity to about 20,000 EVs a month. It has new products coming out this year, including the ET7 luxury sedan. It has plans to expand throughout Europe, including Germany, the Netherlands, Sweden and Denmark.

Also, with a good deal of fear priced into the NIO stock, I’d like to see it recover to $29. There are plenty of with strong catalysts ahead, including today’s earnings report, due after the market closes.

A Closer Look at Nio Stock

Analysts say the company will post a loss of about 14 cents on revenue of $1.5 billion. That would be a year-over-year improvement from a loss of 16 cents per share on revenue of $1 billion.

“The tide may finally be turning. While volumes have stagnated over the past few quarters due to operational bottlenecks,” said Deutsche Bank’s Edison Yu. “We think deliveries are on track to increase from [10,000 a month to 25,000] exiting the year which will shift the narrative away from supply constraints to product cycle.”

Yu still has a buy rating on the NIO stock but lowered his price target to $50.

In February, NIO delivered 6,131 vehicles, an increase of about 10% year over year. That 10% increase came despite its key manufacturing plant being closed for China’s Spring Festival holiday. Also, NIO has delivered 15,783 year-to-date, which is an increase of about 23.3% year-over-year.

In January, it delivered 9,652 vehicles, an increase of about 34% year-over-year. That’s also a sharp jump from the 1,598 vehicles delivered in January 2020.

Demand for Electric Vehicles

Global EV sales in 2021 more than doubled 2020 numbers. There’s that much demand.

“Automakers sold 6.6 million plug-in vehicles in 2021, more than double the 3 million sold in 2020, and more than triple the 2.2 million sold in 2019, according to the IEA,” wrote Stephen Edelstein in Green Car Reports. “The broader definition of EVs as battery electric plus plug-in hybrids also claimed about 9% of the global new-car market, up from 4.1% in 2020 and 2.5% in 2019.”

Numbers should increase even more with governments pushing for a greener future.

The U.S. just promised to cut emissions by up to 52%. Europe says it’ll cut emissions by up to 55%. China will stop releasing CO2 in the next 40 years.  In doing so, they all want millions of electric vehicles on the roads.

The Bottom Line on Nio

There’s heavy demand for electric vehicles. Deliveries are on the rise. A good deal of negativity has been priced into the stock. Plus, which China cooperating with U.S. regulators to create far more stability for overseas listings, fears of any delisting could be put to bed.

Long-term, NIO could be a substantial winner. At the moment, I’d use weakness as a buy opportunity.

On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.

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