Nio Inc – ADR (NYSE: NIO) is headed up early on in the pre-market again this morning. Although the company hasn’t issued any press releases or filed any SEC filings, there is a good reason for the gains. Today, we’ll talk about why NIO is headed up, what we’re seeing from the stock, and what we’ll be watching for ahead.
Why NIO Is Headed Up
As mentioned above, NIO is having a strong start to the session this morning, trading on no news. So, what’s the deal? Well, it has to do with the fact that investors are excited about the company’s potential.
When we talk about Nio, the first comparison that comes to mind is Tesla. Sure, Tesla vehicles have a much higher price tag, but at the end of the day, the two electric vehicle companies face many of the same challenges and have many of the same opportunities.
Interestingly enough however, NIO is likely a stronger play than Tesla was in its early days. The reason for this is that the company is performing overwhelmingly well when it comes to production and deliveries.
If you followed Tesla early on, you know that the company was marred with set backs and delays, rarely hitting its production and delivery targets until relatively recently. However, when it comes to NIO, that’s not the case.
Recently, Nio reported its results for the third quarter and all eyes were on production and delivery. The good news is that the company smashed expectations, showing incredible growth. During the third quarter, the company produced 4,206 ES8 SUVs, delivering 3,268 of them to customers. This proved to be impressive growth. After all, during the second quarter, only 500 vehicles were produced with only 100 of them being delivered.
Moreover, the company is expecting for the strong growth to continue. During the month of October, 1,573 ES8 vehicles were delivered and the company is expecting that in the fourth quarter, it will deliver between 6,700 and 7,000 vehicles, with revenue nearly doubling on a quarter over quarter basis. Sure, these are just expectations, but at the end of the day, the company hit the nail on the head in Q3 and will likely do the same or better in Q4.
There Are A Couple Of Key Factors Playing Into The Growth Here
China is a massive nation and has a larger population than any other nation in the world. Recently, the country has been working to reduce its carbon footprint, in many ways, focusing on vehicles in the process. In fact, the country is working to encourage manufactures and consumers to move to electric vehicles through the use of subsidies. In 2017, these subsidies added up to about $10,000 per electric vehicle purchase, and while this won’t last forever, it’s likely to last for a while. It is expected that this will continue to keep demand high for electric vehicles in China.
On the pricing side of the coin, there’s a benefit there too. We all know that Tesla is the largest and most important competitor to NIO, and believe it or not, that works into Nio’s favor. After all, Tesla vehciles are high end, very expensive vehicles while Nio has priced its vehicles for the mass market.
So, what we have is a company that is seeing strong demand as the government in its home country pushes consumers to its products. Then, with the lower price than the best alternative, demand is only growing. All in all, NIO has an incredible opportunity to grow quickly by doing nothing more than taking advantage of current market conditions.
What We’re Seeing From The Stock
While Nio hasn’t released any news, the stock is running for the top in the market this morning. With investors excited about the company’s potential, there’s no telling how high this can go in the long run. Nonetheless, our partners at Trade Ideas were the first to alert us to the gains. Currently (8:23), NIO is trading at $7.50 per share after a gain of $0.31 per share or 4.31% so far this morning.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on NIO. In particular, we’re interested in following the company’s continued work to increase production and deliveries. While there is still a bit of a long road to profitability, the company outperformed the expectations of many in Q3 and it will likely continue to do so ahead.