Up 37% in less than 2 weeks! Is NIO stock set for a stunning comeback?

NIO (NYSE:NIO) inventory‘s jumped 37% in simply seven buying and selling days. Now at $6, this implies the Chinese language electrical car (EV) agency’s up 51% over the previous yr.

Zooming additional out nonetheless, the share worth remains to be 67% decrease than it was 5 years in the past. Not nice.

I’ve lengthy thought that NIO was a candidate for a barnstorming comeback, assuming it could flip worthwhile. Right here, I would like to check out why the inventory is up and whether or not the funding case has improved sufficient to warrant me taking a place.

Why’s NIO abruptly up?

There look like two principal issues which have despatched NIO shares flying. First, on 21 August, it unveiled its new ES8 SUV, which it says is the biggest battery electrical SUV in China. I don’t doubt that, as these beasts are provided with six or seven seats in three rows.

The Government Premium Version prices the equal of about $58k outright, or $43k with the battery plan. The latter entails a month-to-month subscription, permitting prospects to swap or improve depleted car batteries in any of its battery-swap stations. 

Based mostly on NIO’s 12 full-stack technological capabilities, the All-New ES8 redefines luxurious at a brand new stage.

NIO

On prime of this, traders have been piling into Chinese language shares, which has boosted NIO’s secondary itemizing over in Hong Kong. Certainly, the Shanghai Composite Index is now at its highest stage in a decade.

The current surge was sparked by experiences that Beijing is considering stress-free its stance on digital belongings (it banned cryptocurrencies in 2021).

Is that this a game-changer?

Neither of this stuff actually change the funding story for me. I’ve all the time identified that NIO makes high-quality EVs. By all accounts, the SUVs are like futuristic spaceships inside.

And whereas it’s nice to see some Chinese language shares flying after a couple of very troublesome years, this might rapidly reverse. Elements of the Chinese language financial system are nonetheless fragile, whereas commerce tensions with the US aren’t going to vanish in a single day.

In the meantime, NIO additionally introduced a limited-time supply on the brand new SUV, with a chunky deduction from the acquisition worth and varied vouchers. That’s going to spice up near-term gross sales figures. However the truth NIO’s providing deductions on a swanky new mannequin highlights how fierce the continuing EV worth warfare is in China.

For me, it is a severe threat to NIO’s makes an attempt to show worthwhile.

Price a punt?

Wanting on the forecasts, NIO isn’t anticipated to generate constructive earnings per share earlier than 2029. If it was in a position to obtain this sooner, I believe the inventory might take off like a rocket. And If it was ready to take action in the course of China’s EV worth wars, that may be spectacular. The funding case would then look extra enticing to me.

Nonetheless, that is removed from assured. NIO misplaced $3bn final yr, and has spilled crimson ink like clockwork yearly since itemizing in 2018.

I just like the vehicles and the recurring income aspect with battery subscriptions. However I concern the agency’s attempting to do an excessive amount of with its NIO Homes (half dealership, half group hub) and new sub-brands (Firefly and ONVO). The shortage of value self-discipline worries me.

On the entire, I believe there are higher progress shares for my portfolio.