Stocks to buy

Nio Stock Busts Out of the Blocks Thanks to May Deliveries

Nio (NYSE:NIO) reported May deliveries on June 1 that were mediocre. On the one hand, it delivered 7,024 vehicles in May, 38% higher than April. On the other hand, its deliveries compared to May 2021 were just 4.7% higher year-over-year. Despite the lackadaisical gains, Nio stock has been on a 13% run over the past week and 32% in the last month.

It’s as if investors were betting things would be better in May. But, more importantly, the stock is jumping because investors can almost taste the re-energized growth coming in June, July and August.

In my last article about Nio on May 22, I said that Nio’s product diversity makes it a long-term buy.

“As the BofA analyst stated, the company’s sales and margins are looking up, yet investors value it like it’s never delivered a vehicle before,” I wrote on May 22. “I hate to break it to you; it will officially go over 200,000 cumulative deliveries in its history once it announces May numbers in two weeks.”

Guess what? To be precise, it did go over 200,000 cumulative deliveries in its history — 204,936.

It’s only getting started. Here’s why.

NIO Stock Up 22% Over Past Week

InvestorPlace’s Joel Baglole said on May 26 that investors shouldn’t buy NIO stock on the Nio bounce. His explanation made sense. Baglole argued that any bad news would likely send its share price spiraling lower, erasing the 15% gains achieved between May 11 and May 26.

Baglole said, “NIO stock is not a buy.”

Nio has gained 34% since then, but that doesn’t mean that his argument didn’t merit some consideration. Beyond Covid-19 and supply chain issues, there’s a global recession threatening to break out if Jerome Powell doesn’t put out the inflation fire.

Risk is still a factor. However, I was very enthusiastic about Nio’s vehicle diversity in my latest article:

What stood out for me in Nio’s Covid-affected April deliveries update is that it delivered 693 ET7s, the company’s fourth vehicle to roll off the Hefei factory floor. That’s a 325% increase over the 163 ET7s delivered in March, its first month available to customers.”

“Nio may deliver 1,000 vehicles for each of its four EVs in May. While those aren’t Tesla numbers, they’re pretty darn good for a company struggling to keep the lights on as recently as April 2020.”

Did It Hit 1,000?

Nio didn’t quite hit the target. It delivered 746 ES8s, 2,936 ES6s, 1,635 EC6s, and 1,707 ET7s. Three out of four isn’t bad, especially when your newest vehicle, the ET7, passes the last new vehicle, the EC6.

Nio Deliveries by Brand: May 2022 vs. April 2022

Product Increase/Decrease
ES8 -40.4%
ES6 56.3%
EC6 30.6%
ET7 146.3%

What does this mean? Large SUVs (ES8) aren’t nearly as popular as they once were, for starters. Furthermore, sedans look to be emerging from the SUV shadow. TopGear’s top 20 electric cars list shows that at least half aren’t SUVs.

Consumers eager to purchase EVs at this point are less concerned about the type of EV they buy and more concerned about how awesome it is. The ET7 fits that mold. It’s been described as the BMW or Audi killer. In 2023, Nio will launch the ET5, its fifth production vehicle, passing Tesla (NASDAQ:TSLA).

Under $20, Nio’s a Buy

As I said last time, Nio’s laying the groundwork to become a leader in EV production and deliveries. On so many levels, it’s hard to imagine Nio not being a long-term grand-slam success.

Barron’s reported on May 31 that NIO stock was moving higher for three reasons. The most compelling reason is that the EV company is making a big recruiting push into America. What it’s learning today in Norway will help it get stronger in the future in America.

Over the past year, NIO stock has lost 53% of its value. Tesla, over the same period, gained 20%. Yet, Tesla isn’t getting any breaks from the Chinese government while Nio is.

Nio seems ready to overtake Elon Musk and Tesla by almost every factor except profitability. I guess we’ll find out by the end of December. TSLA stock remains slightly overpriced.

As for Nio, its ET5s are ready to scoop up a big chunk of the global sedan market. That’s not something you likely would have found out on your own.

Nio remains a long-term buy under $20.

On the date of publication, Will Ashworth 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.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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