NIO Inc (NYSE:NIO) Stock Hits Multi-Month High: More Rally Expected?

The electric vehicle sector continues to attract the attention of investors and one of the companies to have managed to gain the attention of the market in recent days NIO Inc (NYSE:NIO).

The Chinese electric vehicles manufacturing company saw its stock continue to move upward yesterday as it ended up with gains of 11%. That took the cumulative gains over the past month to as much as 40%. In light of such gains, it could be a good idea for investors to take a closer look into the company, including some of the latest developments which may have sparked the rally.

Yesterday the stock came into focus after it emerged that the Chinese government had made a policy decision to spark growth in clean energy businesses. The news came as a boost to the NIO stock. The Chinese economy has not had the best of times lately and hence the National Development and Reform Commission (NDRC) came up with certain recommendations.

The NDRC is concerned with the economic development of the country. It emerged that the organization stated that investment of private capital would be necessary in order to accelerate the growth of major projects across China. It recommended such growth focussed investments in a number of sectors and that included the clean energy and transportation sectors too. These are two sectors in which NIO is heavily involved and hence, it is perhaps not a surprise that the stock came into action yesterday.

In the second quarter, the company did not spring much of a surprise and recorded deliveries of 23520 vehicles, which worked out to a year-on-year decline of 6%. The lower delivery figure may have come as a blow to the company given it had launched two new models recently. However, the latest development may prove to be a shot in the arm for NIO in the long run.

While any investment thanks to the policy measures of the Chinese government may be a boost to NIO, there are other avenues for a financial boost for the company too. The company had executed an equity investment worth $740 million from the Abu Dhabi government-owned investment group CYVN.

While the deliveries may have been disappointing in the second quarter it should be noted that there were certain telling green shoots in the first fiscal quarter. The revenues and deliveries had both improved year on year. Additionally, the net losses suffered by the company went down by 18% on a sequential basis.

At the time, the NIO management noted that it was concentrating on boosting the volumes of its newly launched models and optimizing costs. In the first five months of the year, the stock performed poorly and declined by 23%. However, things changed in June as investors may have considered the stock to be a value pick. Since then the stock has been in the middle of a strong rally. It remains to be seen if it can continue to hold on to the newfound momentum in the coming days.