Nio Stock Forecast: NIO shares up nearly 17% to start year

Nio (NIO), one of the most promising electric vehicle stocks out of China, has seen its share price advancing at a healthy clip thus far in 2023. The EV manufacturer saw NIO stock climb another 4.5% on Tuesday for an overall advance of 16.7% in January as of Tuesday's closing price. Nio stock lost nearly 70% in 2022, so early year optimism presents itself as a welcome change of pace for long-time investors.

Nio stock is up 1.2% on Wednesday to $11.37 on the heels of Tesla's (TSLA) 2% gain and the NASDAQ's 0.7% advance.

Nio stock news: Receding covid lockdowns lend support to Chinese stocks

Nio stock is not alone in its recent rally. Fellow Chinese EV makers BYD (BYDDY), Li Auto (LI) and Xpeng (XPEV) have also seen their share prices rise this year as US investors have grown optimistic that the current reopening in China seems to be gathering steam. After widespread protests engulfed many Chinese cities late last year, authorities announced a sudden relaxation of covid protections and lockdowns that is expected to boost economic momentum after the virus set the nation's economy to sleep in 2022. Infections and hospitalizations have soared, but with each passing day it appears the government is not reversing the policy. Profitability concerns are still haunting most Chinese EV producers however.

Though Nio cut its December forecast for deliveries due to the lockdowns related to the Omicron variant of covid, the carmaker reported record December deliveries of 15,815 on New Year's day. That news has persuaded at least some in the market that Nio will see a major turnaround of fortunes in 2023. December's delivery figure was up 51% YoY despite all the difficulties related to the lockdowns.

Investors are also fairly excited, and with good reason, to see what type of numbers two newly launched electric SUVs do in 2023. In late December Nio launched both the EC7, a coupe SUV, and the larger ES8 family SUV model.

Nio EC7 / Source: Nio.com

News that Tesla will soon expand its factory in Austin, Texas has also propelled the EV sector forward on Wednesday. Tesla filed a notice with the Texas state government that it will expand the present 10-million-square-foot factory to build at least five new facilities. These include a $59 million die shop, an $85 million drive unit space, a $3.7 million battery cell testing lab, a $260 million cathode facility and a $368 million facility just called "Cell 1". With Tesla stock down about 70% from past highs, the move shows that CEO Elon Musk is not spending much time dwelling on the share price. Despite recent price cuts in China due to a demand shortfall, Tesla continues to expect heavy demand growth going forward, and the rest of the EV space is benefittng from this longer-term view.

In late December Morgan Stanley reitereated its Overweight rating on Nio stock and gave it a $16.10 price target. “We expect that in the coming months the market will refocus on the pace of resurgence in store traffic/order intake," an analyst for the investment bank wrote in a note to clients.

Nio stock forecast

By this point all Nio stock bulls have realized that NIO shares produced a higher low in early January. Between October 24 and November 9, NIO stock clearly broke through support at $9.50 on three separate occasions while respecting the support level during four other sessions. On October 24 Nio shares even plunged to $8.38. On January 3 and 6, however, Nio stock bounced precisely off $9.50 both times. Based on that factor alone, Nio stock should reattempt the $14 high from December 5 sometime this month. The continued rise in the Relative Strength Index (RSI) above the midpoint at 50 also lends credibility to this forecast. Above there sits further resistance points at $16.54 and $22.

NIO daily chart

The author owns shares of NIO.