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NIO Stock Pops as Wall Street Braces for Record EV Sales

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The shares of Chinese electric vehicle maker Nio (NASDAQ:NIO) surged almost 10% yesterday. NIO stock rallied after The Wall Street Journal reported that unnamed analysts believe the automaker could deliver a record number of EVs in May.

Analysts Are Upbeat on Nio

Nio’s previous monthly deliveries record was notched in July 2023, when it handed over 20,462 EVs. Analysts’ optimism about the company’s ability to eclipse that record this month may be due to its decision to lower the monthly fees for its battery-swapping service in March. In the wake of that move, Nio’s April deliveries more than doubled versus the same period a year earlier.

BOCOM International analyst Angus Chan told the Journal that Nio’s reduction of the prices of its EVs may also have contributed to the increase in its deliveries.

Also bullish on Nio recently was Morgan Stanley. On May 30, the bank said its research indicated that the company was delivering about 6,000 EVs per week. Its analysts reiterated an “overweight” rating on NIO stock.

Reasons to Be Cautious on NIO Stock

The company’s reduction in the prices it charges for its battery-swapping programs and EVs is likely to weigh on its profit margins and bottom line. With the company due to report its first-quarter results on June 6, investors could react poorly if the company’s profitability metrics are indeed poor.

Further, as I pointed out in a recent column, Nio is facing a tremendous amount of competition. Moreover, battery swapping, which has largely failed to attract many consumers historically, appears to be the automaker’s main point of differentiation versus its peers.

Although the company’s deliveries rose significantly last month following its price cuts, it’s also worth noting that its revenue from EV sales increased only 4.6% year-over-year in the first quarter. Consequently, I would not be surprised if the company’s growth decelerates over the medium-to-long term as the initial euphoria over its price cuts fades.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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