Why Nio stock jumped 17% today

Investors are buying the dip in Nio stock ahead of an important product launch.

| More on:
A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Nio (NYSE: NIO) stock made a dramatic U-turn today after yesterday's plunge, popping 16.7% by market close. Although the markets remain choppy, investors in the electric vehicle (EV) stock are excited about an event coming up tomorrow (US time), June 15.

So what

Nio will hold a product launch event tomorrow and although the company hasn't specified what product will hold the spotlight, it should be its ES7 SUV. Nio released a teaser video of the new model today, giving a sneak peek into its camera and lidar sensor system.

It's an important event as Nio has been postponing ES7's launch since April amid COVID-19 restrictions in China. ES7 will be Nio's sixth EV and is a mid-to-large-size five-seater SUV, between the ES6 and ES8.

That may raise concerns about market cannibalization where the new product could eat into the demand for existing ones instead of creating fresh demand for the company. ES7, though, is smaller than ES8 and will likely be priced higher than ES6. Pricing could make all the difference here which is why it's important to consider what Nio announces tomorrow.

Note that ES6 is also Nio's lowest-priced trim and made up the bulk of its deliveries in the first quarter. Adding a more expensive model, therefore, could also help Nio bump up its average selling prices in the coming quarters, provided the new model receives a warm reception from consumers. Importantly, Nio is expected to start deliveries of the ES7 crossover as early as August.

Now what

Nio's first-quarter numbers failed to impress the market but the EV maker expects its deliveries and margins to bounce back. ES7 will likely contribute to that rebound.

Nio may be facing some headwinds but these appear to be near-term blips and I wouldn't be surprised to see more buying coming in the growth stock. The EV maker, after all, is looking forward to a much stronger second half of the year and is working on its ambitious long-term plans that include the launch of an affordable mass-market EV by 2024.

I consider Nio one of the top growth stocks to buy on any dip, and that's exactly what investors appear to be doing today.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Nio Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A woman is excited as she reads the latest rumour on her phone.
Broker Notes

Goldman Sachs says this US stock is replacing Tesla in the Magnificent Seven

And no, it's not a tech company. It's in the healthcare sector.

Read more »

A man looking at his laptop and thinking.
Share Gainers

Should I buy Nvidia stock as an Australian investor?

Many Aussies are thinking of jumping on the bandwagon, but they need to think about these issues first.

Read more »

Digital rocket on a laptop.
Broker Notes

Is the Nvidia share price on course to reach US$1,400?

You betcha, says one analyst.

Read more »

A woman holds a soldering tool as she sits in front of a computer screen while working on the manufacturing of technology equipment in a laboratory environment.
International Stock News

Could Nvidia become the most valuable stock on earth?

Can anything stop the Nvidia stock price?

Read more »

A group of young ASX investors sitting around a laptop with an older lady standing behind them explaining how investing works.
International Stock News

What can ASX investors learn from Warren Buffett's latest buys and sells?

We've just found out what Buffett's been buying and selling recently.

Read more »

electric vehicle such as Tesla being charged at charging station
International Stock News

Why Tesla stock tanked in January

Will the electric vehicle leader see earnings decline once again in 2024?

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
International Stock News

Will Nvidia stock be worth more than Microsoft by 2030?

The graphics giant has been growing at a much faster pace than Microsoft, but can it sustain that momentum?

Read more »

Man with hands in the middle of two items with money bags on them.
International Stock News

Stock-split watch: Is Tesla next?

Stock splits are fun. But how much substance there is in Tesla splitting its stock is debatable.

Read more »