Nio Stock Rocketed Higher This Week. Is It Time to Buy?

Key Points

• Nio's latest SUV undercuts Tesla's new China release by over $4,000.

• Nio's battery swap technology allows it to lower the upfront EV purchase price to customers.

• Nio reports its second-quarter financial update on Sept. 2.

• 10 stocks we like better than Nio ›

Chinese electric vehicle (EV) maker Nio (NYSE: NIO) is boldly taking on the competition, and investors are buying in. Nio stock is building on gains Friday morning as shares have shot higher by over 20% this week, according to data provided by S&P Global Market Intelligence.

The jump came as Nio unveiled its latest ES8 SUV, the EV maker's flagship premium SUV. It wasn't the vehicle itself that spurred investor interest, but rather its aggressively low price point.

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Image source: Nio.

Nio has an advantage over Tesla

Nio priced the ES8 EV at about $43,000, with a battery subscription. Nio's unique battery swap technology allows customers to quickly replace depleted batteries with fully charged ones at one of its many swap stations. That subscription service also creates an ongoing revenue stream for the company.

That battery technology allowed Nio to undercut Tesla's new Model YL by more than $4,000. The new Tesla EV is a long-range version of the Model Y being offered in China. Nio is aiming to take advantage of its battery swap service in the highly competitive Chinese EV market.

Investors are bidding up Nio shares this week in the belief that Nio can successfully continue to grow in that market. This week's jump helped the stock soar by more than 40% in the last three months.

The next catalyst could come Sept. 2 when the company releases its next quarterly financial update. Investors will want to monitor vehicle margins as well as Nio's reported loss from operations. The recent stock spike likely won't hold if the company isn't making progress toward profitability.

If there is some visibility for sustained profitability, though, Nio shares may look cheap at its recent price level.

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

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Howard Smith has positions in Nio and Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.