Nio Stock Could Double Your Money This Coming EV Cycle

close-up of nio electric vehicle highlighting car logo

Key Points

  • Nio stock could be next in line for mega investors to start looking into as a potential value play.
  • Analysts are already behind it, pointing to a higher valuation ahead, and it makes all the sense in the world.
  • Here is what to watch out for this week as earnings are announced.
  • 5 stocks we like better than BYD

Today's market avoids Chinese stocks because the nation is "uninvestable." However, those who know where to look and what to look for may find some unbelievable value plays scattered across Asia's powerhouse. There are still several tailwinds to be digested by markets. However, they are all building a potentially bullish case for China.

Not all Chinese stocks are created equal. For example, plenty of industries like construction and energy stocks will likely remain in the dark due to a lack of excitement. Other sectors, like consumer discretionary stocks led by names like Alibaba Group NYSE: BABA, could quickly become more popular among foreign investors. Today, the focus is on the electric vehicle space as a play for a consumer turnaround.

Leading the pack in that space, made famous by Warren Buffett when he bought it nearly two decades ago, is BYD OTCMKTS: BYDDF, but that stock already had most of its run. It's time for small-cap Nio NYSE: NIO to be recognized for its explosive growth potential in this quickly growing pocket of China's economy. Before you get ahead of the pack, here's why you should start looking into China.

The Machine at Play

Not every investor sees China the same. However, some of the biggest players on Wall Street have looked to the nation's stocks as potential pockets of value to be squeezed in this upcoming cycle. Whether due to insight or coincidence, these fund managers are riding the tailwind of the government itself.

In its latest round of stimulus for the nation's lackluster economic activity, the Chinese government is injecting up to $278 billion in new liquidity and funds in the different asset classes offered to the public.

One of the main objectives of this stimulus is to trickle down benefits to the consumer level in an attempt to heat up inflation back to healthy levels. But they didn't stop there.

The big firms are not allowed to short-sell stocks in China anymore. Further, some names have even been slapped with a selling restriction, a playbook that acts as a floor of stability for the Chinese markets. Michael Burry, Ray Dalio, and other fund managers took notice and couldn't look away.

By buying into names like Alibaba Group, value investor Michael Burry (yes, the one who called the 2008 financial crisis) is expressing his bullish and optimistic outlook for the future of the company and the nation as well, and he's not alone.

Ray Dalio, the manager of the world's largest hedge fund (Bridgewater Associates), has been quietly buying into the iShares MSCI China ETF NASDAQ: MCHI since the third quarter of 2023. While these more oversized pockets are forced to go with the bigger recognizable names, you can focus on smaller ones that offer much more upside, such as Nio.

Why Nio?

Starting with analyst outlooks, this stock proposes 40% growth in its EPS for the next twelve months and a net upside of 112% according to analysts' price target of $12.3 a share. However, this is the consensus; some think it could go much higher than that.

How about a heck of a lot higher? Analysts at Citigroup NYSE: C think this stock is worth $19.20 a share, which calls for an upside of 232% from where the stock trades today. Now, that's something to write home about, isn't it?

So, what could be causing these analysts to suddenly be so bullish about this EV stock? Well, China has landed some preferential treatment from Chile's largest lithium miner and reserve holder, Sociedad Quimica y Minera de Chile NYSE: SQM.

While the main agreement has been with BYD, the benefits will likely trickle down to the rest of the industry peers.

According to management, Nio delivered up to 8,132 vehicles in February alone and a total of 467,781 year-to-date. The stock trades at only 1.6x price-to-sales multiple, so it can be considered a bargain next to competitors like XPeng NYSE: XPEV, who trade at a higher 2.4x multiple.

Considering that the stock trades at only 37% of its 52-week high price, you now have another reason to believe it could move much higher on its upcoming earnings announcement on March 5. Pay particular attention to the number of actual delivered vehicles and for management guidance into future deliveries as a gauge for demand coming to the company's bottom line.

Should you invest $1,000 in BYD right now?

Before you consider BYD, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and BYD wasn't on the list.

While BYD currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Alibaba Group (BABA)
4.182 of 5 stars
$74.63+2.9%1.31%13.77Moderate Buy$112.91
Citigroup (C)
4.8494 of 5 stars
$62.47-0.3%3.39%18.48Moderate Buy$62.91
Sociedad Química y Minera de Chile (SQM)
4.4861 of 5 stars
1.7378 of 5 stars
XPeng (XPEV)
2.0798 of 5 stars
iShares MSCI China ETF (MCHI)N/A$41.34+1.5%3.43%9.37N/AN/A
0 of 5 stars
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli


Contributing Author

Value Stocks, Asian Markets, Macro Economics


Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets


CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate

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