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Nio: Is this rally just another head fake?
Nio has rallied before, only for them to turn out as fake. Still, it has fallen a lot from its ATH and seemingly there's plenty of headroom for further share-price gains and stock traders are interested in Nio's upside potential.
It's amazing to think that Nio stock is a favourite among traders now, considering that the China-based automaker was on the brink of ruin during the COVID-19 crisis in 2020. The times have changed though, and Nio has apparently evolved into a serious threat to Tesla and other new-energy vehicle rivals.
First step, you need to decide whether you are on board with Nio's foray into battery swapping. Then the next step would be to delve into the company's most recent updates. First, there's Nio's November vehicle-delivery update, which looked pretty good but still disappointed investors.
There's nothing terrible about that result, but the delivery grew slower compared to Xpeng and Li Auto.
Their deliveries grew by triple digits year over year, compared to Nio's 12.6%. Nio's November EV-delivery growth rate seems more sustainable than Li Auto's or XPeng's. If the market views triple-digit growth- percentage rates as normal nowadays, that's the market's problem, not Nio's.
Turning to December, Nio just released its unaudited third-quarter 2023 results. The automaker delivered 55,432 EVs, up 75.4% year over year. That's not triple-digit growth, but it shouldn't disappoint any reasonable investor.
Indeed, NIO stock is perking up now after a rough patch in August through November. Are skeptical investors finally favouring Nio.
Perhaps they should consider taking a share position in Nio as a fixer-upper or a potential comeback story. Notably, Nio's total revenue jumped 46.6% year over year to the equivalent of USD2.61 billion in 2023's third quarter. Thus, the big picture looks bright, even if short-term stock traders didn't like Nio's November stats.
Granted, profitability remains elusive for Nio. The company sustained a 4.56 billion RMB net earnings loss (US$6.25 billion) in Q3 2023, though that's an improvement over Nio's 6.06 billion RMB net loss in the year-earlier quarter.
Going forward, investors should hope to see Nio continue to close the profitability gap. It's certainly not necessary for the automaker to grow its vehicle deliveries by triple-digit percentages.
All in all, the recent pop in Nio stock looks like the real deal rather than just a head fake. Thus, it's not a terrible idea to hold a few Nio shares - as long as you understand the risks involved with the company pursuing battery-swapping technology.
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