Nio stock price forecast: why it is soaring and what next

Nio stock price continued its strong surge as investors piled into Chinese technology companies. It jumped to a high of $7, its highest level since October last year, and 133% above the year-to-date low. 

Nio’s growth is accelerating

The Nio stock price has jumped in the past few months as investors have embraced a risk-on sentiment. It has also jumped in tandem with Chinese technology companies. 

For example, the Baidu stock price has soared to the highest point this year. The other top Chinese companies, like Alibaba, Tencent, and Xiaomi have all jumped this year.

Nio has also soared as the company’s product launches continues doing well. The company launched the ONVO brand last year, and most recently, it unveiled the third-generation ES8 at the NIO Day event.

There are signs that these vehicles are doing well despite the soaring competition in the country. The most recent data showed that the company delivered 31,305 vehicles in August, a 55% increase from the same period last year. It has now delivered over 166,472 vehicles this year, and hinted of more deliveries in the coming months.

Most of the deliveries are its premium Nio brand, while the others, like Onvo and Firefly, are also seeing strong growth this year.

Nio released strong earnings

Nio also published strong financial results earlier this month. Its deliveries in the second quarter rose to over 72,000 during the quarter, much higher than the 57,373 it delivered in the same quarter last year.

As a result, its revenue rose 9% to $2.6 billion, while the gross revenue jumped by 12% to $264 million during the quarter.

Most importantly, the company narrowed its loss during the quarter to $697 million, and the management has hinted of future profitability as it now focuses on boosting its deliveries.

However, the main risk for Nio stock is the growing competition in the country which has affected its profit margins. Like other EV companies, Nio has had to adjust its prices to match those of its top competitors.

The other major risk is that Nio is a highly dilutive company because of its substantial losses. It recently announced the pricing of its $1 billion equity offering, which will be raised using its American and Hong Kong  shares. It is now increasing the outstanding shares by over 181 million.

Nio’s outstanding shares have experienced strong growth in the past few years, which has diluted the returns for its long-term investors. It has 2.09 billion outstanding shares, up from 1.25 billion in 2020.

The fundraising was necessary as the company ended the last quarter with about $3.8 billion in cash and equivalents, much lower than what it had when it started the year.

Nio stock price technical analysis 

The daily timeframe chart shows that the Nio stock price has staged a strong comeback in the past few months, moving from a low of $3 in April to $7 today. This surge is in line with our forecasts, which you can see here and here.

The stock formed a golden cross pattern on August 20th as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other. This crossover is one of the most bullish chart patterns in technical analysis.

The stock has moved above the important resistance level at $6.82, its highest level on August 26. Also, the Relative Strength Index has continued rising, a sign that it has momentum.

However, it is nearing the extreme overshoot level of the Murrey Math Lines at $7.03. Therefore, the most likely scenario is where it continues rising in the near term as bulls target the next important resistance level 

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