Nio stock price prediction: no obstacles ahead for this bull run to continue
16:16, 27 October 2020
Electric vehicle maker stocks continue to produce mass gains – and headlines – this year, as a shift from fossil fuels to renewable sources appears to be imminent.
Nio, the Chinese electric vehicle maker that is currently making its way to become a strong competitor to EV giant Tesla, has been among the biggest winners in the industry since the year started, generating an eye-popping 600 per cent return for investors in roughly 10 months, which is almost 200 per cent more than the gains seen by Tesla during the same period.
Meanwhile, for comparison purposes, the Nasdaq 100 has gained roughly 35 per cent so far this year, while the S&P 500 has managed to rise 7 per cent during that same period.
Nio’s remarkable bull run has been primarily driven by a combination of an increasingly optimistic outlook for the EV industry, along with a subsequent wave of analysts upgrades and price target hikes, which have boosted the company’s valuation to as much as $39bn (£30bn, €33bn) despite the fact that Nio has not generated a profitable quarter in its history.
Is it possible that this high level of optimism could end up turning against investors if the firm’s promises of higher sales and output fail to materialise?
The following Nio stock price forecast attempts to analyse where the stock may be headed next, which factors are driving the current bull run and whether the Nio stock outlook is promising enough to justify these levels.
Nio stock price analysis
Nio’s recent bull run started in June 2020, as the coronavirus pandemic accelerated a shift towards renewable energy sources that had already been well under way for a few years.
Market players believe that social distancing may be a factor that could increase the percentage of people that purchase cars, as the outbreak may leave a lasting footprint in people’s minds regarding the dangers of using public transport.
Policymakers in multiple countries have been favouring electric vehicles for years now as a way to reduce the levels of pollution in their cities, while lower oil prices have also taken a toll in the oil and gas industry, leaving oil lobbies with less money to play with to further delay favourable regulations for the industry.
In this context, Nio is emerging as a well-positioned business that could reap sizable returns from this historic transition from fossil fuels and that is the main reason why the price of its stock has seen significant upside lately.
The daily chart above shows how the price of Nio shares has skyrocketed since late May, with the stock delivering an outstanding 1,000 per cent return during that period.
The uptrend that emerged off those levels continues to be in play, although the price of Nio shares has lifted off to new heights in recent days after receiving price targets hikes from both Citigroup and JP Morgan.
Citi upgraded the stock to buy from a previous neutral rating and hiked its 12-month price target to $33.20, up from a previous forecast of $18.10. Meanwhile, JP Morgan moved the stock to overweight while raising its 12-month target to $40.
Nio shares have retreated a bit during the days that followed the news, although the RSI remains in overbought levels while the MACD has posted its highest reading in the history of the stock.
In the absence of any negative catalyst that could plunge the stock back into the channel shown in the chart, chances are that Nio shares will now find support at the upper trendline of the channel, which could become support now as a new uptrend emerges.
If that were to occur, a plausible Nio share price prediction (made by using a Fibonacci trend-based extension tool) outlines a first target at $26.55 – the stock’s latest high – and two subsequent targets at $29.40 and $31.75.
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Nio stock price in 2021
Unlike Tesla, Nio has not posted a profitable quarter yet. That gives Nio shares an ace up its sleeve, as the stock could receive a big boost once the company manages to achieve that milestone.
That said, it is important to note that Nio’s CEO William Li has set a goal of producing a total of 150,000 units during 2021, which implies an increase of around 28,000 units per quarter in a single year – a bold forecast indeed.
Such an increase in production – assuming that the majority of the vehicles will be sold – could push Nio revenues significantly higher although it is hard to estimate if that would allow the firm to start posting a profit.
At the moment, 10 out of 15 analysts polled by CNN Money are rating the stock a buy, while three of them are rating the stock a hold. There are only two sellers at the moment, although the lowest price target for the stock’s US ADR is $44 while the highest Nio share price forecast for the next 12 months sits at $269 per share.
The extreme bullishness towards the Nio stock price prediction makes it challenging for short sellers to make a case, although the company and the management still have a lot to achieve before the firm can be considered a Tesla-like endeavour.
This is evidenced by Nio’s price-to-sales ratio, which currently sits at 5.9 and 2.9 for the firm’s last 12-month and next 12-month earnings respectively, which is lower than the 6.9 and 6.1 multiple that Tesla shares are currently enjoying.
Nio stock price prediction: bottom line
It is commonly hard to establish a path for a stock like Nio given the natural uncertainty of a business that is valued at such levels in the absence of earnings to support those valuations.
That said, tech firms in an early stage of growth are often valued based on sales rather than profits as they aim to achieve profitability after certain sales volumes have been achieved.
In that regard, Nio’s price-to-sales multiples remain on the low-end compared to other high-growth companies, which makes a case on behalf of the firm’s shares in regard to its short-term outlook.
Do you want to become a part of the EV market and make your own bets on the Nio stock forecast? Track the Nio stock performance live on our interactive price chart and spot the best opportunities to open a trade.
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