Just a couple of weeks ago, we judged now to be the best time yet to pick up Nio (NYSE:NIO) shares, and with good reason. The company was poised to be a “long-term secular growth story,” our research found, and with fresh gains coming in from pre-market trading today, there's more reason than ever to support such a notion. The reason why those gains took place only makes the situation look better for Nio.
Back From Earlier Losses on Delivery News
Yesterday wasn't looking all that great for Nio, thanks in large part to the political climate over in China, where Nio focuses a lot of its efforts right now. Yet in pre-market trading today, the company managed to pull an extra 2% of its overall value thanks in part to some terrific news on deliveries.
The company announced it delivered 5,291 vehicles just in the month of November. Objectively, that may not sound like much, but for the company, that's actually a record. It's also a gain of 109% as compared to this time last year. Shipping more than double what you did this time last year is no mean feat, and that gave Nio a little extra room to play in the market.
While this was absolutely a great month for Nio, it's actually a continuation of a year that's looking good too. That is, again, no mean feat, especially given what 2020 has looked like for a host of companies across the board. So far, Nio has delivered 36,721 units, reports note, which represents an increase of 111.1% against last year's figures. In fact, recent figures suggest that Nio now controls 7.4% of the entire electric vehicle market in China, a point which has made it a big name and also drawn some attention from governments all over.
Government Troubles Swinging In
If there is one thing that may give Nio investors pause, however, it's the growing concern emerging from several different governments. Right now, the Chinese government is said to be looking into fraudulent activity in the electric vehicle sector. While that doesn't specifically relate to Nio right now, the possibility of a negative halo effect kicking in isn't out of line. Further reports have noted that the main economic planning body in China is working to launch a nationwide review of all electric vehicle projects currently in play, which suggests that Beijing may have an interest in bringing some of these companies to heel.
Moreover, the US government is also taking a look at Nio and other Chinese companies, potentially getting together legislation that may see such companies de-listed from US markets. Since this bill is still in the House, it may not get anywhere any time soon—especially with the ongoing difficulties posed by the still-contested US elections—but it is a point to watch for all the same.
An Improving Analyst Case
The rumblings of government don't seem to be disturbing the analyst community much, as revealed by our latest research. The consensus rating is now closer to a full “buy” than it's been at any time in the last six months. While it's still at a “hold”, the ratios—one “sell” rating, five “hold” and six “buy”—put it very close to an average of “buy”. The consensus price target has also been on a sharply upward cant; six months ago, the average price target was a mere $3.74. Today, it's around eight times that figure at $28.69.
In fact, some fairly recent developments are encouraging; Goldman Sachs, earlier today, upgraded Nio from “sell” to “neutral,” and just four days ago, Bank of America maintained its “buy” rating on the company. About a week before that, Deutsche Bank Aktiengesellschaft upgraded its price target from a moderate $34 per share to a hefty $50 per share, which is a solid figure given the company closed yesterday at $50.54.
Still a Solid Future Ahead
Sure, the government rumblings are a little distressing. The notion that Nio could be pulled off the New York Stock Exchange has to give some pause, but given the highly fractious nature of the United States government right now—a point which isn't likely to improve any time soon—seeing such a move actually come to pass seems unlikely at best.
Aside from that, Nio still represents a major and clearly growing force in the electric vehicle sector. A company that controls 7.4% of the Chinese electric vehicle market must be taken seriously, and the chances that such gains were made dishonestly are fairly low. Nio remains a major force in the electric vehicle market, and will likely remain so. It does bear watching for the potential issues that may emerge, but those who own Nio, and those who buy in now, will likely continue to reap gains for some time to come.
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