This Stock Looks Like a Great Buy

Shares of Nio (NYSE:NIO) stock, China’s premium electric vehicle maker, blew the doors off of 2020. Beginning the year at $4, NIO stock shot up like a rocket through year-end, finishing 2020 at $50.

Mark it down as one of the best years of any stock in recent memory.

But stocks don’t go up in straight lines. After a red-hot start to 2021, NIO stock has since trended lower, losing more than 10% of its value over the past three weeks.

This recent weakness in NIO stock is an opportunity — and the time to buy is now.

The company recently provided a strong delivery update which implies that business momentum continues to ramp.

The outlook strongly implies that NIO is positioned to have another breakout year in 2021. And both the fundamentals and technicals strongly support the thesis that NIO stock is a great buy at $55.

So, forget the noise and the buy the dip.

NIO Stock: Strong Business Update

NIO recently reported January delivery numbers, and they were nothing short of spectacular. The company delivered 7,225 vehicles last month. That is up 352% year-over-year, marking NIO’s tenth consecutive month of triple-digit growth and its single-best year-over-year delivery growth rate ever.

Better yet, January deliveries rose 3% month-over-month. That’s big, because auto sales usually plunge from December to January in a post-holiday effect. For example, NIO’s January 2020 deliveries dropped 50% from December 2019. This year, though, NIO’s sales rose from December to January. That strongly speaks to the momentum underlying the business today.

Trailing twelve month deliveries now stand just above 49,000 — up 13% month-over-month and 143% year-over-year.

All in all, it appears that NIO’s business isn’t just sustaining its robust 2020 momentum, but actually building on it. Things are only getting better here. And the outlook implies that will only continue to get better — which, of course, implies better days ahead for NIO stock.

Robust Outlook for 2021

NIO had a strong 2020. The company could have an even better 2021.

China’s auto sales struggled in the first half of 2020 thanks to the Covid-19 pandemic. They then rebounded in the second-half of the year as pent-up consumer demand coupled with low interest rates. Those two drivers will remain vigorous in 2021, and for the year, China’s auto sales are expected to rise 4%.

EVs will be at the epicenter of this rebound in China’s auto market. Thanks to government support, increasing supply, falling costs, and shifting consumer demand, China’s EV market is expected to grow by an impressive 40% in 2021.

NIO will be at the forefront of this booming Chinese EV market.

The company just launched a new premium sedan, it’s fourth EV model. NIO also just announced a brand-new battery that significantly boosts performance specs such as driving range and recharge time. Plus, the company is dramatically improving its battery swapping stations to be far more efficient with much more capacity.

In other words, NIO will materially improve its business fundamentals in 2021, at the same time that China’s EV market catches fire.

That combination ultimately implies that NIO stock could have better year this year, than it did last year.

Favorable Valuation & Technicals

The fundamentals and technicals underlying NIO stock strongly point to the idea that the stock is a great buy here and now at $55.

On the fundamentals side, NIO has a long growth runway ahead of it as the company turns into a globally dominant supplier of premium EVs with a healthy margin profile thanks to falling battery costs and strong pricing power. My numbers indicate that this reality makes NIO stock worth at least $60 today, based on the company’s earnings potential over the next decade.

Meanwhile, on the technicals side, NIO stock has developed a habit of consistently dipping to just above its 50-day moving average on sell-offs, before bottoming out and reversing course.

NIO stock today trades at $55. The 50-day moving average sits around $52. This is historically consistent with where NIO stock usually bottoms out and reverses course.

Bottom Line on NIO Stock

NIO stock is a long-term winner that you want to buy and hold for the long haul. The question is just when to buy more.

That time is now. NIO has been in a downtrend. But the fundamentals and outlook remain robust, and technical and valuation support are showing up.

Buy the dip today. Hold for the next few years.

— Luke Lango

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Source: Investor Place