NIO Stock may not repeat 2020 posting, but there is a hike available

With 2020 on the books, it’s fair to say it’s been a spectacular year for electric vehicle (EV) stocks, especially those of the Chinese variety, such as Nio (NYSE:NIO). All of NIO’s stock jumped 1,103.48% last year.

In terms of delivery and sales credibility, Nio is perhaps the closest thing to investors. You’re here (NASDAQ:TSLA), justifying the comparisons often used with “Tesla of China”. Yes, there are critics and they claim that with the surge of new Chinese listed electric vehicle manufacturers it is only a matter of time before the bubble bursts.

It remains to be seen if and when this bubble will burst or if it is even a bubble at all. What is clear is that there are favorable winds for Nio and its competitors, including electric vehicles reaching price parity with internal combustion engines over the next three or four years, which is earlier than expected.

Additionally, China has the world’s worst pollution problem and relies on electric vehicles as part of its efforts to improve air quality and reduce reliance on fossil fuels. On that note, there is sufficient domestic support for Nio, including a billion dollar loan from Beijing which acted as a lifeline for the then struggling automaker and an investment from the tech giant. Tencent Holdings (OTCMKTS:TCEHY).

Although Nio is not a state-owned enterprise (SOE) in the truest sense, Beijing is invested in the success of the company, which is positive for investors whose stocks are volatile in a still nascent industry.

NIO Stock Faces imminent test

Speaking about its relationship with the Chinese government, the Chinese Ministry of Finance recently announced that it is reducing subsidies on new electric vehicles by 20% in 2021. This equates to a subsidy reduction of around $ 700 for the latest model. EC6 by Nio.

Nio responds by telling customers that if they buy the EC6 before January 10, they can get the 2020 subsidy, with Nio paying the difference. This is a short term factor that could be part of the NIO stock equation. The other is Nio Day on January 9.

This event could bring some highly anticipated announcements including a new vehicle reveal. Speculation revolves around whether Nio could unveil its first concept luxury sedan, intended for the Audi A7 or the BMW 7 Series. There are also rumors that the company will present a 150 kilowatt-hour battery that is compatible with all. his models. Assuming that to happen, there is the potential for inventory shifting, as it would increase the range of Nio vehicles while forcing existing owners to switch to the new pack. Translation: It’s a new source of income.

Analysts see an opportunity in Nio Day. Ahead of the event, Bank of America analyst Ming Hsun Lee reiterated his “buy” rating on the stock while raising his price target to $ 59. This implies an increase of 21% compared to where Nio settled on December 31.

For investors, these are realistic expectations

After a year in which it posted a four-digit gain and traded at 48 times the sales, NIO stock is expensive, but that doesn’t mean investors shouldn’t nibble on the stock, especially on setbacks. It’s more about being realistic from here on out. Can Nio run higher in 2021? Absolutely. Is there another payout of 1,100% plus in the cards? Probably not.

Keep in mind that Nio is still an evolving business. Not so long ago, survival was a real issue for investors to consider the name. Today it is the hub of the world’s largest electric vehicle market.

Speaking of which, there could be 125 million electric vehicles on the road by 2030, almost half of which are in China. This means that there is still a lot of long-term growth for Nio, especially if it aims to increase range capacity and the debut of new vehicles.

As of the publication date, Todd Shriber does not have (directly or indirectly) a position on any of the titles mentioned in this article.

Todd Shriber has been a contributor to InvestorPlace since 2014.