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Is NIO Worth an Investor Gamble Ahead of Its Annual Day?

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The year gone by was indeed a tumultuous one for the stock market with the coronavirus outbreak largely crippling various industries and investors bearing the brunt of massive losses. However, investors of NIO Inc. (NIO - Free Report) could not have disagreed more. Precisely, this Chinese electric vehicle (EV) stock was easily one of the most popular bets of 2020 and rewarded its shareholders handsomely. As a matter of fact, the stock witnessed jaw-dropping gains of more than 1,200% in the period. Can the company replicate its impressive performance on the bourses this year as well? Well, time will tell but surely the firm has a lot working in its favour that makes us optimistic that it is set to fly high in 2021 too.

High Hopes From the NIO Annual Day

Investors and industry watchers are super excited about the fourth NIO day, scheduled for tomorrow (Jan 9, 2020). The event, which serves as a platform of product and service launches, is likely to provide a further boost to the company’s share value. The automaker is all set to launch its sedan model, which is speculated to be a production version of the ET Preview concept car, revealed by the firm in 2019. Production of the sedan is rumored to begin in the fourth quarter of 2021 or early next year.

NIO will also be providing an update on its autonomous vehicle and other battery related technologies. The company, often dubbed the “Tesla (TSLA - Free Report) of China”, is most likely to unveil a150-kilowatt-hour (kwh) battery pack, which comes much as a surprise considering that it rolled out a 100-kwh battery just a couple of months back.

In a bid to solidify its standing in the EV market in the wake of emerging EV entrants like Li Auto (LI - Free Report) and XPeng (XPEV - Free Report) , NIO released the 100-kwh battery pack in November 2020. The battery pack boasted 37% higher energy density compared with its earlier packs, which could be swapped into any of its model for a better range. An enhanced 150-kwh battery pack barely within a couple of months is indeed a remarkable feat for the company.

Additionally, the company is expected to provide updates on its next-generation battery swapping system, which is likely to be introduced alongside its new flagship sedan. The second-generation replacement power stations are anticipated to be equipped with more battery packs, which could be developed at a lower cost, thereby accelerating deployment. This apart, NIO will unveil its autonomous driving platform NT2.0, outfitted with LIDAR technology.

New EV model, better batteries, driverless technology update and more! So stay tuned for the details of the product and technology updates that will be shared by the company tomorrow. 

Should You Buy the Stock at Current Price Levels?

Well, NIO is indeed riding the EV hype and is fast emerging as the rising star in the e-mobility space. China’s e-mobility revolution is a major catalyst for NIO, which is going the extra mile to ramp up its output and capture the burgeoning EV market. Importantly, China’s EV penetration is likely to grow five-fold by 2025. The country, which is already the biggest market for e-mobility, expects demand for green vehicles to jump to 25% of new car sales within 2025. NIO seems to be well-placed to capitalize on the same.

The company, which currently offers three electric vehicle models, namely ES8, ES6 and EC6, is witnessing a huge uptick in sales. Notably, 2020 deliveries of the firm surged 112% year over year to 43,728 vehicles.  As the company is focused on scaling up its production, its vehicle margins are improving gradually. It delivered 17,353 vehicles in the fourth quarter of 2020, surpassing the upper-end of its guidance. The firm’s battery-swapping infrastructure is its forte. Particularly, NIO’s Battery-as-a-Service (BaaS) model is very well received among its users. If the firm can sustain its innovation and technology advancement, which is key to its success, there’s no stopping it amid the growing popularity of green vehicles. 

However, here’s a word of caution. NIO’s balance sheet is not very strong and its valuation is already quite overstretched, thanks to its meteoric price gains. It seems that much of the company’s promises of development are already factored into its stock price. Certainly, NIO is riding on multiple tailwinds that make it a good bet for the long haul. It’s just that one could wait for a better entry point before hitting that buy button. NIO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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