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Nio Stock Is a Winner, But How Much Higher Can It Go?

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Heading into today's election, the markets might have been floundering, but the extreme bouts of volatility had minimal impact on Nio (NIO).

The Chinese EV maker continued on its merry way, by doing what it has done so well throughout 2020 – accumulating share gains. Year-to-date, the stock has accrued an astounding 764%.

The market might be infatuated with tech/growth/EV stocks, all boxes the company dubbed "the Chinese Tesla" ticks, but its market performance is getting some backup from real world data.

Nio announced earlier this week that in October it sold 5,055 vehicles, displaying a 100% year-over-year uptick.

With waiting times on deliveries now reaching up to 6 weeks, Deutsche Bank analyst Edison Yu believes the demand “continues to outstrip supply.”

“NIO already announced it hit 5k units produced for the month last week on 10/29 and we think it could potentially reach about 6k output/month in the near term running on 1 shift assuming it can run at full speed/efficiency and supply chain can keep up,” the analyst said. “As a reminder, the plant can achieve max capacity of 150k per year on 2 shifts, which NIO is targeting on a run-rate basis by the end of next year given the strength of the order book (we expect supply constraints through most of 2021).”

For October, Yu estimated Nio would deliver 4,750 units, and the latest beat represents “another month of record sales.” Yu believes Nio’s order book “remains robust” and expects another tailwind from the 100kWh battery option, which should become available later this month.

Nio is also targeting European expansion and hopes to enter the market by 2H21. Yu anticipates NIO will to “try to emulate the success of Huawei and Xiaomi.” The two hold approximately a quarter of European market share.

Yu’s confidence in Nio is confirmed by a bump to the price target; The figure moves from $26 to $34. However, it is proving a thankless task keeping up with Nio’s share price gains and the new target suggests only modest downside of 3%. Yu’s rating, at this point, remains a Buy. (To watch Yu’s track record, click here)

Overall, the Street’s outlook on Nio’s prospects offers a conundrum. While the stock holds a Moderate Buy consensus ratings, at $23.37, the average price target implies shares will drop by 30% over the coming months. (See NIO stock analysis on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.