child (nyse:child) has been facing its fair share of problems recently. These include production delays due to COVID-19-related shutdowns in China, supply chain issues, analyst downgrades, and even a short-seller report alleging the company has been inflating revenue and net income. Nio’s stock is down about 30% so far this year.
But the outlook for the Chinese electric vehicle maker is improving, with positive developments in China, as well as in the Western world.
Reading: Is nio still a buy
Nio’s stock appears to have bottomed out last month, with shares up more than 90% since then. but they are still attractively valued, so now is a good time to buy nino stocks.
nio production picks up as lockdowns subside
Earlier this year, Nio was forced to stop producing its electric vehicles for several days due to coronavirus-related lockdowns that closed its Chinese suppliers. Beginning in late March, lockdowns imposed by the Chinese government affected the company’s production and sales. This continued until the end of May, when Nio finally announced that things were getting back to normal.
“in shanghai, 96.3% of government-monitored industrial enterprises have resumed work, with the production rate exceeding 70%, according to china’s ministry of industry and information technology,” reported cnbc on June 14.
The easing of lockdowns in China should lead to a significant rebound in Nio production and sales. in fact, that process has already begun. In May, Nio delivered more than 7,000 EVs, up 38% from April and up 5% year-over-year.
On the company’s first quarter earnings conference call on June 9, CEO William Li said, “As of June, while the supply chain and vehicle production have basically returned to back to normal, our vehicle deliveries are back as well. on the way.”
Meanwhile, Beijing is reportedly considering extending electric vehicle subsidies due this year to help support its auto sector. If this happens, it will provide a significant boost to the company’s financial results and to Nio’s stock.
In addition to easing lockdowns in the East, Nio is also making progress in the Western Hemisphere.
child points to western expansion
June 28th marked the fourth anniversary of the nio battery exchange service. In those four years, Nio built 997 stations and completed 9.7 million battery changes, mostly in China.
As I’ve noted in the past, I think battery swap stations, which allow drivers to get a new, fully charged battery in about five minutes, are a powerful positive catalyst, and not just in China.
nio has started to expand beyond its home market, opening its first European battery swap station in norway earlier this year. Expansion of its battery-sharing service network should help boost demand in Europe. Additionally, Nio charges a monthly subscription fee for its Battery as a Service (BAAS), which could become a revenue generator for the automaker on the mainland.
Nio is also reportedly looking to build a factory in the United States, and CEO Li has said he expects Nio products to be available in 25 countries and regions around the world by 2025.
the end result of the boy’s actions
Nio shares have nearly doubled since their May 12 low of $11.67, but are still down 56% over the past 12 months. On the plus side, Nio shares are trading at a much more reasonable valuation than a year ago, 2.4 times analysts’ median earnings estimate for 2023.
Given the company’s powerful positive catalysts, Nio shares are a good buy for risk-tolerant growth investors.
at the date of publication, larry ramer did not hold (directly or indirectly) any position in the securities mentioned in this article. The views expressed in this article are those of the author, subject to the Publication Guidelines of investorplace.com.