When it comes to electric vehicle (EV) stocks, Chinese automaker Nio Inc. (NYSE: NIO) has been one of the more popular choices for investors as of late.
But why all the hype?
For one, Nio is up an impressive 543% on a 12-month basis. But it’s also one of the top EV players in China’s auto market, which accounts for more than 40% of all EVs sold worldwide according to Business Wire.
So, it’s safe to say that China’s EV auto market is a huge growth catalyst for Nio. And that potential market penetration alone is enough to send shares soaring.
That’s why, in January of this year, I said that Nio could easily climb all the way up to $100 per share. But my opinion quickly changed following a May sell-off when the stock took a big dip.
In fact, I even ended up calling Nio a “second-tier” EV stock.
So, today, I thought I’d follow up with our old pal Nio and see how it stacks up against other Chinese automakers entering the EV market.
If you look at a year-to-date chart of NIO, you can see the stock had a phenomenal recovery in June following its May low.
In fact, NIO moved up about 25% on a one-month basis:
Talk about a recovery!
Right now, the big indicator I’m paying attention to is implied volatility, which is still low. However, volatility will likely rally as we head toward Nio’s earnings event on August 9.
On a good earnings report, I believe Nio could trade up to the $57 to $60 range, which is where it previously traded at the beginning of the year.
In fact, I looked at August-dated options to see where the market makers were pricing implied volatility heading into earnings. And my findings show that a $10 move has been factored into those August contracts leading up to the earnings event.
Considering the fact that Nio is currently trading at $50 a share, my $60 price target was right on the money. So, our thinking is currently in-line with the market makers.
Now, let’s say August rolls around and Nio reports stellar earnings, and champagne bottles start popping.
In that case, I would expect Nio to take out its prior high of $66.99, which will likely signal blue skies ahead from there on out. From that price point, my $100 prediction doesn’t look that crazy.
So, to sum this up: I do think Nio is the top pick out of China’s EV automaker stocks. Although it has a long way to go before it catches up to a company like Tesla Inc. (Nasdaq: TSLA).
Right now, it’s a waiting game to see how Nio’s earnings event shakes out in August. But pending good news, Nio’s stock could be a high-flyer heading into the second half of the year.
Until then, safe trading!
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