Why Nio Stock Jumped 65% in September and Is Still a Solid Buy

Every stock tells a story, but Nio's (NYSE: NIO) is the kind you'd want to grab the popcorn for. The Chinese electric vehicle (EV) stock was having a dismal 2024 until last month when it staged one of the most dramatic comebacks -- after plunging 55.5% in the year through August, Nio stock gained a whopping 65.3% in September alone, according to data provided by S&P Global Market Intelligence.

I was confident about Nio stock's recovery in the second half of 2024 and believed it was a top stock to buy; but honestly, I didn't expect such a rebound so fast and so soon. What's brewing?

Rising deliveries, better margins, more cash

Dwindling deliveries and margins for several quarters sent Nio shares tumbling, and there were few takers for management's confidence in a recovery for the second half of 2024. There were telltale signs, though, that Nio should be able to deliver better numbers as the year progressed. Specifically, the company completed upgrading all its models to an advanced platform by April and had lined up new launches, expecting these to boost its deliveries.

Last month, Nio reported a 144% year-over-year and a 91% sequential jump in deliveries for the second quarter. Its revenue doubled year over year to $2.4 billion and its gross margin improved significantly to 9.7% from only 1% in the year-ago period. Its vehicle margin surged to 12.2% versus 6.2% in Q2 2023.

Nio's numbers beat analysts' estimates, giving the languishing stock a much-needed boost. Later in September, Nio announced that three strategic investors had agreed to invest 3.3 billion yuan, or roughly $470 million, in its key subsidiary, Nio China. Nio itself will pump 10 billion yuan into Nio China.

This fresh infusion of cash comes right as Nio ramps up the production of its first mass-market model, the L60, under its sub-brand Onvo. Nio launched the model in mid-September and started deliveries at the end of the month.

Why Nio is a stock to buy and hold

Nio recently reported record deliveries of 61,855 vehicles for the third quarter, with Onvo also contributing to sales. That confirms that Nio's sales have stabilized -- it has now delivered more than 20,000 units for five consecutive months. Nio also expects to boost its vehicle margin to 15% by the end of 2024.

Steady monthly deliveries above the 20,000 mark and double-digit margins are the two biggest reasons why I believe Nio stock remains a buy. I also see a lot of potential in Onvo as it targets the mass markets and can give Tesla a run for its money. Nio expects to launch one new model every year under Onvo. With the Chinese government also unexpectedly announcing a slew of stimulus measures in September to boost the economy, this could just be the beginning of good days for Nio.

Should you invest $1,000 in Nio right now?

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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.