NIO at Half-Price: Beyond the Skepticism Lies Skyrocketing Growth

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China-based electric vehicle (EV) manufacturer Nio (NYSE:NIO) can’t seem to catch a break on Wall Street lately. NIO stock is far below its peak price in 2023. However, the market will re-rate Nio sooner or later, and now’s the time to take advantage of low share prices.

I’m not claiming that Nio is a perfect company right now. Morgan Stanley analyst Tim Hsiao observed “lingering concerns about NIO’s cash flow.” Hsiao also feels that “investors are likely to focus on whether NIO can narrow its cash burn rate sufficiently from 3Q by improving scale and working capital.”

Yet, even with Nio’s financial imperfections, the company still has strong growth potential. In time, reluctant investors will wish they had taken a Nio share stake while the U.S. market was ultra-pessimistic about the company.

A 50%-Off Sale on NIO Stock

There’s no denying that China’s economy is under pressure in 2023. And again, Nio’s cash flow is a concern. Still, it was excessive for the U.S. market to chop NIO stock in half, bringing it from $16 to less than $8 since August.

Short-term investors have seemingly ignored Nio’s amazing progress in September. That month, Nio’s EV deliveries increased 43.8% year-over-year.

Furthermore, Nio may have a prime opportunity to gain more control over its vehicle production process. Not long ago, Anhui Jianghuai Automobile Group disclosed its plans to sell factory assets. Those assets include two factories where Anhui Jianghuai manufactures vehicles for Nio.

Referring to those two vehicle production factories, Hsiao posited that it could make “strategic sense for NIO to assess potential investments related to the F1 and F2 plants.” Moreover, acquiring the two factories could help to “mitigate the risks associated with supply chain disruptions and production hiccups in future” and enhance “overall operational efficiency and stability.”

Nio’s Battery Swapping Service Adds Value

There’s no guarantee that Nio will acquire the two factories from Anhui Jianghuai. What’s known for certain, though, is that Nio has a battery swapping service and many other EV makers don’t.

This service sets Nio apart and could give the company a competitive edge in China and elsewhere. As Research and Markets explains, Nio calls this service Battery as a Service (BaaS), and it allows “users to purchase electric vehicles at a lower price while leasing the battery separately.”

There’s tremendous growth potential here. Reportedly, the swappable electric vehicle battery market is estimated to expand at a compound annual growth rate (CAGR) of 25% from 2023 to 2031.

Nio is an early and aggressive mover in this fast-emerging market. This is another reason to believe in Nio’s future, even if short-term stock traders refuse to acknowledge it.

Ignore the Doubters and Give NIO Stock a Try

China’s economy is under pressure, and Nio’s financials aren’t perfect. Nevertheless, Nio is selling a lot of EVs and the company is staking an early claim in the battery swapping service market.

Overall, short-term stock traders are dismissing bullish catalysts for Nio. Yet, this presents an opportunity for long-term investors. So, today is a great day to consider buying a few shares of NIO stock. Soon enough, Wall Street will come to appreciate Nio’s true value.

On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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