Last month, I wrote about NIO (NYSE:NIO) and explained why I had an optimistic outlook on the beaten-down electric vehicle (EV) maker. At that point, I mentioned investors could consider it for their portfolios. Over the past month, the stock’s jumped, with some catalysts meaning it could maintain this momentum.
An unrealised profit
If an investor had parked £10k in NIO stock this time last month, they’d currently be up 6.22%. As a result, the easy maths means the £10,000 would be worth £10,622. This is a tidy return in just a few weeks.
By comparison, the S&P 500‘s fallen 0.45%. The FTSE 100‘s flat over the same period. So it goes to show that NIO’s outperformed the broader indices that some would use as a benchmark.
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Another way to assess the return is to compare it to another EV-maker, for instance Tesla. Some might be surprised to know that Tesla shares are down 16% in the past month!
Of course, it’s essential to always look at the longer-term performance of stocks to get a clearer view. Despite the pop for NIO stock, over the past year it’s down 24%. This contrasts to the broader stock market both in the US and in the UK, which has rallied over this time fame.
Reasons for the jump
Part of the move higher can be explained by optimism ahead of the release of the latest financial results this week. This comes after delivery numbers for January saw strong growth versus the same period last year. NIO delivered 13,863 vehicles in January, representing an increase of 37.9% year on year.
Even though the upcoming results are for 2024, data from January showed that for the calendar year, 221,970 vehicles were delivered, an increase of 38.7% from 2023. The business is clearly moving in the right direction. As it benefits from economies of scale, it should help to boost profit margins as revenue should increase at a faster pace than costs.
Another factor has been greater optimism around the Chinese economy recovering. NIO’s one of a few Chinese stocks investors can easily buy on the US stock market. Therefore, some trade it as a way to express their view on how China, in general, is performing.
Looking ahead
Even with the move over the past few weeks, the stock’s still heavily beaten down. Some will cite that we’ve seen short-term rallies that have ultimately fallen flat and not resulted in anything larger. This is true, and is a risk going forward.
The biggest concern I have for a long-term rally is the persistent loss-making nature of operations. Until this can be resolved, there are some investors that simply don’t want to consider it.
On balance, I do feel this is a stock for investors to consider buying, but understand why some will want to wait and see what happens with the results this week before making a decision.
