Stocks to buy

Why NIO Stock Is a Risky But Rewarding Bet on China’s EV Market

Chinese EV company Nio (NYSE:NIO) is establishing itself in the quickly expanding EV sector. Despite facing significant operational hurdles, Nio has managed to overcome most, aiming to double its sales in 2023 with a new and expanded product lineup. As a result, many investors are wondering if NIO stock is a wise investment choice.

I’m going to analyze why NIO stock is a good buy right now. Shareholders may want to take advantage of this great chance to invest in a business with room to develop in the following years.

Lots to Discus with Nio

Nio stock has fluctuated wildly over the past few years. Like other EV stocks, the post-pandemic bubble saw Nio’s valuation soar. However, as macro concerns have picked up and interest rates have risen, valuations have declined.

That said, there’s plenty to discuss with this pure-play Chinese EV maker. The Chinese government seems like a great place to start.

Regulators in China have imposed stringent rules on many growth areas of the market. Whether it’s online education, social media, gaming, e-commerce, or EVs, the Chinese Communist Party appears keen on reining any undue influence from business leaders. Accordingly, international capital has largely sat on the sidelines regarding Chinese stocks.

That said, U.S. investors are starting to look closer into Chinese stocks, as investors are taking a cue that the Chinese government may be stepping away from the over-enforcement of specific stocks.

Additionally, Nio has some company-specific catalysts that investors are watching.

First, a major announcement of a partnership between the Chinese EV maker and a Norwegian smart-energy company named Tibber recently took this stock higher. The collaboration aims to enhance charging facilities for Nio vehicle owners in Europe. The positive response from investors was evident yesterday with a noticeable increase in the company’s stock price, and this trend has continued today.

Additionally, Nio presently provides a specific electric vehicle charging alternative that enables clients to switch out a fully charged battery with their car within a few minutes using battery swap stations. According to a report from the European Nio app, CnEVPost reported that Nio users could currently link their vehicles to the Tibber app.

Nio’s latest partnership with Tibber will enable drivers to monitor energy consumption and prices to optimize their charging schedule based on electricity rates, whether charging at home or using traditional stations. The collaboration will enable intelligent charging through Tibber on Nio’s Power Home charging equipment, setting the vehicles automatically during periods of the day with the cheapest energy prices.

NIO Stock Supported by Strong Fundamentals

As for Nio’s numbers, according to Chartmill, the company is expected to demonstrate a significant increase in its earnings per share. Over the next five years, NIO’s earnings per share are projected to expand by 27.95% each year. Additionally, based on the previous year’s performance, NIO demonstrated remarkable growth in revenue, which rose by 92.25%.

Over the last five years, NIO has shown a substantial rise in earnings, with an annualized increase of 84.66%. Furthermore, forecasts for the subsequent five years suggest that NIO will experience a remarkably potent increase in revenue, with an average yearly growth rate of 37.68%.

If these numbers continue, Nio stock could look cheap, at least on a price-to-sales basis. It may be a few years until this company is profitable, but as with most investments, getting in early can reap the greatest rewards.

It’s a Buy

With the popularity of EVs and the Chinese government’s loosening its grip on tech companies, Nio is looking very promising for investors. For the past five years, the business has experienced exceptional progress in both sales and EPS, and this trajectory is projected to last. Its latest partnership with Tibber adds another layer of potential growth. Considering all these factors, Nio is an excellent choice to buy right now.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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