NIO incorporated (NASDAQ: NIO), is spreading EV fever at lightning speed after it posted better than expected sales results. However, it is not just NIO that is hot of the EV investment radar. The Tesla (NASDAQ: TSLA), Workhorse (NASDAQ: WKHS), and Hyllion (NYSE: HYLN) bulls are all charging together, providing plenty of opportunities for investors. Many investors who missed the Tesla boat are now looking to board the NIO train before it is too late. However, investors are wondering have the train doors shut. Let us get to the bottom of this investing dilemma today.
Table of contents 1. Why was NIO's sales record so special? 2. How does NIO fit into the EV market? 3. Is now the time to invest NIO?
NIO crushes EV sales for June and Q2 2020
NIO sold 3,740 EV in June, which equates to a 179% year on year. Of the 3000+ vehicles sold the NIO’s SUV and ES6s was where most of the revenue flowed from. Also, for Q2 of 2020 NIO successfully sold 10,331, representing a 191% increase year on year. All in all, each sale posting beat Wall Street’s expectations, ultimately setting the EV industry alight.
NIO’s record sales attracted investors for three reasons. First, revenue growth is a step closer to profitability. It provides long-term bulls reassurance that the EV maker is heading in the right direction. Second for NIO to improve its revenue in a recessionary car sales market, as seen with the decline in GM, Ford’s, Toyota’s sales, highlights a viable business model. Lastly, COVID-19 significantly impacted the supply chains of many EV manufacturers. Thus NIO’s impressive sales highlight how management could effectively navigate through a minefield of macro issues. Hence the raging bulls rallied behind NIO today, triggering an 18% surge.
NIO’s position in the EV sector?
Tesla is the EV king, their incredibly high share price validates this claim. However, many are wondering who is the runner up, and is NIO grooming to be come the EV prince? To find out, we must compare NIO to Hyllion and Nikola.
Firstly, Nikola, despite being a higher share price, constantly attracts short-sellers, and recently changed its CEO, and it does not have product on the market. Thus, NIO is way ahead of Nikola in the Electric Vehicle space (opinion not advice).
In comparison to Hyllion, the companies are distinguishable in that HYLL focuses on trucks instead of NIO’s high performance electric vehicles. Also, massive sales disparity between Hyllion and NIO positions the shanghai manufacturer ahead.
Is it too late to invest in NIO?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area
Short answer: Yes is potentially not too late to invest, however, understand the nature of a short-term bubble. (Opinion not advice)
The gigantic increase in buy orders created new resistance and support points on the NIO chart. The current level of support sits around $8.70. If NIO could stay above the $8.70 mark it would indicate that today’s surge is represents an increase in the true value of NIO and not just hype. Moreover, resistance levels do sits around $9.30-9.50. However, as long as the higher support levels are set than areas of resistance should not be an issue. Hence, if you were looking to day trade NIO it would be smart to monitor the support and resistance points, instead of just rashly jumping in at any price. (opinion not advice)
Long term – potential to average down
Most of the time, we cover the short-term and long-term. However, the short-term future is uncertain, which triggers alarm bells for short-term investments. Because you could look to join the NIO train and ride for a few stations. However, if fear through a second wave, possible recession or political instability creeps in the NIO train would likely derail. Thus, a long-term investment seems like a viable option. Especially if we use the long-term growth of Tesla as a possible indicator of NIO’s future direction. Overall, if I was investing for the long-term cementing a position in the coming weeks could be a smart idea, to average down if the markets become bearish.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Patrick McLoughlin, Senior Manager of YIG