This has been the year of transition towards electric vehicles. As countries gear up to achieve their mission towards a cleaner environment, several EV makers are preparing to take a larger market share. Nio (NYSE:NIO) was basking in the glory of the strong Q2 earnings when new concerns about its self-driving technology emerged. In the past week, NIO stock went from $44 to $38. However, the stock is up 160% over the year and has generated strong returns for investors.
I have always been bullish on NIO stock and recommend a buy in every dip. I believe NIO stock has the potential to hit $50s in the coming weeks.
With that in mind, let’s look into the catalysts driving NIO stock higher.
Stellar Q2 results
Nio recently reported Q2 results and posted a narrower loss than last year. The deliveries for the quarter stood at 21,896, a 111.9% year-over-year increase. Revenue grew 127% to $1.31 million, which is a splendid year-over-year rise. The net loss was $90.9 million, a 50% decline from the same quarter a year ago.
As of June 30, cash and cash equivalents stood at $7.5 billion. Nio has seen a rise in a significant rise in research and development expenses and the selling, general and administrative expenses in the quarter and we have seen the results in the strong vehicle sale numbers. It shows that the company is putting money in the right place and is generating revenue from the same.
Nio expects revenue between $1.38 million to $1.49 million for the next quarter, which is 96% more than a year ago.
The strong revenue and delivery numbers are proof that the company has the potential to serve the demands of the customers and with an increase in production, it will be able to reach a wider market and take the revenue to new highs.
Entry Into the Mass Market
Apart from the strong Q2 results, Nio stock was up because of the announcement of a new mass market brand. The company is working on a new brand for the general market and the company has stepped up preparations for the same.
The car is geared to rival Toyota Motors (NYSE:TM) and Volkswagen (OTC:VWAGY) and will be an affordable alternative to premium cars.
Wide a large battery swap network, Nio’s move into the mass market can give it an edge over its rivals.
Nio currently has three SUV models and it will launch a luxury sedan and two other models in 2022. The company is constantly working on expanding its product offering which attracts new consumers. It will also lead to a larger share in the market and generate strong sales volume.
It expects to deliver between 23,000 and 25,000 vehicles in the next quarter, which is slightly higher than the prior forecast. Nio delivered 7,931 vehicles in July.
Additionally, the company has already shipped the first batch of ES8s to Norway for deliveries in September. The company is firing on all cylinders and is expanding across all fronts.
The Bottom Line on NIO Stock
With Nio, there is nothing to worry about with the fundamentals. As the company launches new models, it will see a rise in sales and revenue and this will take Nio stock higher. The company is already expanding across Norway and the new models will give a wider choice to customers. With the right price point and autonomous driving, Nio cars are going to be high in demand.
I also believe the entry into the mass market will be a game changer for the company. However, it will be interesting to see how it pans out. Domination in the EV market may take time, but Nio is a strong competitor to some of the top companies and is making its presence felt in the best manner.
Any dip in Nio stock is an opportunity to buy.
On the date of publication, Vandita Jadeja did not have (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.