Nio Stock Forecast: Now is a great time to buy, here's why

Nio is undoubtedly one of the most popular stocks for investing in electric vehicles, a sector that is set to explode over the next few years as the automotive world begins its transition to all-electric.

The company released very satisfactory quarterly results on Wednesday evening, which were unfortunately not well received by the market, with Nio shares ending yesterday’s trading day down 3.41%, adding to -0.57% on Wednesday, and -2.19% on Tuesday. All in all, between Monday night’s close and yesterday’s, Nio’s shares had lost over 6% in 3 sessions. Given that the quarterly results were good, and that Nio remains one of the best electric vehicle stocks, this temporary setback could provide an ideal opportunity to buy the stock, especially for long-term portfolios.

Strong results punished = Buy opportunity on Nio

Logo NIOThe start-up lost 0.42 yuan ($0.07) per share in the second quarter, less than the 0.68 yuan loss expected by consensus. The loss was also much smaller than the 1.15 yuan per share loss in the same period last year.

Meanwhile, revenue rose 127.2 percent year-on-year to 8.45 billion yuan ($1.31 billion), higher than the 8.32 billion yuan estimated by analysts.

Nio expects third-quarter revenue to be between 8.91 billion yuan and 9.63 billion yuan, up about 96.9 percent to 112.8 percent from the same quarter in 2020.

All in all, these are solid results and in every way better than expected. So the question is, why did Nio stock fall in the face of such data?

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3 factors that show Nio’s weakness is only temporary

The answer is not directly aboutNio stock, but rather a combination of external factors. Firstly, it should be remembered that Nio is not the only stock to have been punished after strong results this quarter. Indeed, market expectations were very high, and we have seen some very strong stocks fall on better than expected results.

Secondly, it should be remembered that Nio, although listed on the US stock exchange, is a Chinese company. In recent weeks, Chinese stocks have been hurt by the Chinese government’s desire to regulate several industries more heavily. And while Nio has not yet been concerned, investors seem to think that this is not out of the question.

Finally, more specifically regarding yesterday, it should be recalled that the much higher than expected US producer price index suggested to the market that inflation may not be as temporary as the Fed says, which led to a wave of pessimism.

In summary, these factors should only have a temporary bearish impact on the Nio share price.

Technical analysis clearly calls for buying Nio shares

The weekly chart of Nio stock shows that the stock has been in a long-term uptrend since October 2019. The stock marked an all-time high at $67 in the month of January.

Action Nio - graphique hebdo

We can also note that between January and May, Nio stock posted an intermediate correction. This correction ended with a low around $31 in May, and the stock has since started to rebound, currently around $42. Thus, now could be an ideal time to buy.

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If we take a closer look at the daily data, we can also find several arguments to buy Nio shares.

Action Nio - Graphique journalier

Nio’s share price rose back above its 100-day moving average in June, and this moving average has since acted as a support. As the stock is currently close to this indicator, we can also confirm on a daily basis that Nio shares represent an immediate buying opportunity.

Consider taking a position on Nio shares

Against this backdrop, we could consider a buy at the current price of around $42. In terms of targets, the July 1 peak at $55 is an obvious target, ahead of the all-time high of $67. The former implies a potential upside of over 30%, while the latter would represent a 60% gain by buying Nio stock today.

As for protective stops, those who choose a $55 target could position it at $39, below the July 27 low. Those targeting a rise in Nio to $67 can afford a wider stop at $30, below the May 13 low.