Is NIO Stock a Good Buy at These Prices?

Yesterday, NIO stock rose more than 12 percent after a Citi analyst raised his price target on the stock. The China-based electric vehicle maker also officially launched its 100kWh NIO battery pack today.

On Nov. 5, NIO stock rose more than 12 percent after Citi analyst Jeff Chung raised his target price on the stock from $33.20 to $46.40 and reiterated his “buy” rating. The new target price implies a 12-month return of 9.6 percent from the stock's closing price of $42.35 yesterday. The analyst is betting on China’s new energy vehicle sector, and thinks NIO has an enhanced product cycle in 2021.

Citi also started coverage of Li Auto and XPeng. It rated Li Auto as "hold," expecting the company to break even in 2022 due to sales volume growth, and XPeng as "buy," anticipating the company to break even in 2024 and to report 57 percent sales volume growth over the next five years.

NIO held a media conference on Nov. 6 to launch the 100kWh battery. The event was held at 12:30 a.m. ET. 

NIO models with the new 100kWh battery will be available for pre-order beginning Nov. 7. With the introduction of the 100kWh battery pack, the range of NIO’s ES6 will increase from 430km to over 600km, and the range for NIO’s ES8 from 415km to 580km. According to NIO, “With over 300 patents filed and gained, the 100 kWh battery features the CTP (cell to pack) technology, realizing 37% higher energy density.”

NIO stock was down about 6.6 percent at $39.68 in premarket trading today as of 6:56 a.m. ET. The stock rose 12.3 percent on Nov. 5 and closed at $42.35 with a market capitalization of $57.7 billion. NIO stock is trading 0.3 percent below its 52-week high of $42.49 and 2,451 percent above its 52-week low of $1.66. Year-to-date, the stock had risen by 953 percent as of Nov. 5.

Currently, analysts' average stock price forecast for NIO is $25.71, which suggests a 39.3 percent downside. Their highest target price of $46.60 implies a 10 percent upside, while their lowest target of $7.70 suggests an 81.8 percent downside. Among the ten Wall Street analysts tracking NIO, six recommend "buy," three recommend "hold," and one recommends "sell."

I believe NIO stock is a buy right now based on its strong growth outlook. In October, the company delivered 5,055 vehicles, up by more than 100 percent from its deliveries in October last year. The company’s sales should explode as electric vehicle adoption grows. With Tesla’s stock price costing more than $400, NIO stock provides a low-cost entry to the EV market.

XPeng stock rose 30.9 percent on Nov. 5 and closed at $35.85 with a market capitalization of $27.2 billion. XPeng stock is trading 1.6 percent below its 52-week high of $36.44 and 109.5 percent above its 52-week low of $17.11.