Nio (NYSE:NIO) earned a pair of upgrades from JPMorgan and Bank of America ahead of its quarterly earnings report. Despite reporting a drop in deliveries in the first quarter, NIO stock is holding a steady uptrend. Why are investors betting on this China-based electric vehicle supplier?
Nio reported revenue falling ~16% from last year to $177.3 million. Deliveries only fell slightly Y/Y to 3,838. The slight decline is not a worry because China locked down much of the country to stop the spread of COVID-19.
Nio continued to lose money in the quarter, while its cash on hand was $338.6 million. More recently, the April deliveries of 3,155 ES6 and ES8 vehicles signal positive selling momentum in the months ahead. Though the company is nowhere near comparable to the global strength of Tesla’s (TSLA) business, investors may bet on NIO instead.
Tesla has a market cap that is ~40 times bigger than that of NIO. If Nio reports continued strength with vehicle unit sales, then the stock could keep trending higher.
A word of Caution
Luckin Coffee’s (NASDAQ:LK) accounting fraud and Momo’s (NASDAQ:MOMO) valuation compression suggest that investors are pickier about China-based stocks. For now, Nio is a favorite but that sentiment could change quickly.
