Two major positive news has sent the share price of NIO Inc. (NYSE:NIO) more than 50% higher in just two days. Currently, the financial stress is still the main theme for NIO. But given the share price is so low, any fundamental change to its funding outlook will send the share price rocketing. This presents a "high-risk, high-return" for investors.
NIO announced their October deliveries numbers on November 4th. In last month, NIO delivered 2,526 vehicles, including 2,220 ES6s and 306 ES8s. This marks October as the best month in 2019, increasing 25.1% from the strong delivery in September.
These strong numbers have delivered two important messages to investors:
Another big news released by NIO on Tuesday (11.05) is that the company is entering into a strategic collaboration with Mobileye (OTCPK:MBBYF), an Intel (INTC) company that develops vision technology for Advanced Driver Assistance Systems (ADAS) and autonomous driving, to provide:
highly automated and autonomous vehicles (AV) for consumer markets in China and other major territories. As part of the planned cooperation, NIO will engineer and manufacture a self-driving system designed by Mobileye, building on Mobileye's level-4 (L4) AV kit. This self-driving system will be the first of its kind, targeting consumer autonomy, engineered for automotive qualification standards, quality, cost, and scale. NIO will mass-produce the system for Mobileye and also integrate the technology into its electric vehicle lines for consumer markets and for Mobileye's driverless ride-hailing services. This variant will target initial release in China, with plans to subsequently expand into other global markets.
The news sent NIO's share price up by over 36% on the trading day:
Source: NIO
We believe there are several merits regarding this news that led to a positive response from investors:
a rollout in China was more efficient as the regulatory environment was centralized and the Chinese government was working on standardizing Mobileye's safety model for self-driving cars into law.
Despite the recent positive news from the company, the biggest concern for NIO is still their financial situation. The short-term sales boost and strategic collaboration with Mobileye might not be able to bring meaningful improvement to the financials. We should be able to get a clearer tell from Q3 results.
We still believe that financial stress is the main concern for NIO at the current stage. Recent positive messages show continuous effort from the company and potential improvement in its financials. For risk-takers, the company presents attractive returns with high risk.
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