Chinese electric vehicle manufacture had struggled for many months, but things seem to be looking up for the company in recent weeks. Analysts on Wall Street have also taken notice of the potential long term upside in the Nio Inc’s (NYSE:NIO) stock, and it could be worthwhile for investors to perhaps take a closer look at it as well.
Is The Rally Sustainable?
The company still has a long way to go before the NIO stock can be deemed a safe investment, but the company’s prospects are improving quite rapidly. In the company’s fiscal first-quarter results, NIO’s revenues dropped by as much as 16%, and while that is a disappointment, there are other things that need to be considered.
However, more importantly, NIO’s losses dropped considerably from $406 million in the previous quarter to $221.8 million. The company had been in massive financial trouble, and there were fears about its long term viability. However, NIO ended the first quarter with a cash balance of $338.6 million, thanks to an agreement with Hefei City worth $1.42 billion. On top of that, the company also revealed that its deliveries should rise by as much as 100% in the second quarter and in May, it reported a 215.5% year on year rise in deliveries.
Hence, there is no doubt that the situation has improved considerably for NIO, and with the Chinese economy opening up, deliveries could rise further. However, not all analysts are bullish. Goldman Sachs based the projections on the company’s 2020 or 2021 earnings and could only set a price target of $6.4 a share. For the NIO stock to pay off handsomely in the long term, either of two things would need to happen. Either the company would need to continue to grow in double digits, or it would have to be more profitable than what the market is expecting. At this point, the NIO stock is, at best, a speculative play.