All about Investing

2 Big Reasons Nio Stock Is Flying High Today

Related categories

Nios production halt might not be as big a concern as the market made it out to be.

What happened

After sharp declines over the past couple of days, shares of Nio (NIO 4.95%) surged this morning and were up as much as 5.3% at 11:10 a.m. ET.

Investors believe fears about Nio's decision to halt production might have been overblown, even as they were just reminded of a popular investor's interest in the electric vehicle (EV) stock.

So what

Nio stock plunged Monday morning after the website CnEVPost reported the company as having suspended production after several of its supply partners were forced to shut operations amid the COVID-19 lockdowns in China. The automaker also said a suspension of production will now mean a delay in deliveries of its vehicles, which possibly includes its flagship sedan, the ET7. Nio started deliveries of the ET7 on March 28.

This morning, though, Nomura analyst Martin Heung tried to dispel investors' fears by stating that Nio's production lines are still running on weekends on a limited scale, and that the production halt it announced was limited to weekends only. Heung said so based on his talks with the company's management, according to the TheFly.com.

The Nio ET7. Image source: Nio.

This is a pretty important development as given the way Nio shares crashed on Monday, it seemed the market believed the automaker had shut production completely until further notice. That would have jeopardized its plans for 2022, but that might not be the case just yet if the company is still manufacturing vehicles.

Also, Heung said Nio is confident of starting production at its under-construction second factory at NeoPark in the third quarter, provided the pandemic lockdown doesn't spread beyond Shanghai. That city has been under a complete lockdown, and it hasn't just affected local companies like Nio, which is headquartered in the financial hub. The Shanghai Gigafactory of Tesla (TSLA -0.18%) has been shut since March 28.

Now what

Nio may have halted production and its shares may have plunged lately, but long-term investors aren't deterred. ARK Invest's Cathie Wood reminded the market of her interest in Nio in an interview with Yahoo! Finance today.

Wood believes the Chinese government's focus on 'common prosperity' in a bid to bridge the wealth gap means high-margin companies like Tesla are likely on the government's radar. Wood is therefore looking at low-margin companies like Nio that are helping increase access to transportation in China. Wood also gave a thumbs-up to Nio's designs.

Wood bought Nio shares for the first time in an ARK Invest fund on March 25 while selling some Tesla shares at the same time. Her interview today, coupled with Nomura's big reveal, has reignited the spark for Nio shares.

Leave your comment
Name
E-mail
Comment