Why Nio Stock Skyrocketed Today

Key Points

• Nio stock announced a new SUV line, and the news powered big gains for its stock today.

• Nio's ONVO L90 will debut with a normal model and a cheaper, battery-as-a-service model.

• The Chinese EV specialist looks cheap on a price-to-sales basis, but it's a risky play in the EV market.

• 10 stocks we like better than Nio ›

Nio (NYSE: NIO) stock rocketed higher in Tuesday's trading following the announcement of a new vehicle. The company's share price closed out the daily session up 11%, despite a 0.4% decline for the Nasdaq Composite index in the session.

Nio's valuation surged today after the company announced its new three-row SUV model. With today's pop, the stock is now up roughly 15% across this year's trading.

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Nio stock surges on ONVO L90 SUV announcement

Nio is rolling out its new ONVO L90 model for the Chinese market on Aug. 1. The vehicle will be rolled out at two price points -- a $39,000 complete model and a $27,000 battery-as-a-service model. The company's revenue increased 21.5% year over year in the first quarter, and investors are betting that the rollout of the company's new SUV will boost vehicle deliveries and allow the business to tap into high-margin service-based revenue streams.

What's next for Nio?

Despite the recent rally, Nio stock is still down roughly 76% over the last three years -- and the company is valued at just 90% of this year's expected revenue. Given that Tesla is currently trading at approximately 11 times this year's expected sales, Nio's price-to-sales ratio could look quite cheap at current levels.

For starters, Nio has yet to shift into profitability. The stock also comes with some big geopolitical risk factors connected to the increasingly adversarial relations between the U.S. and China. Nio could wind up delivering big wins for investors if the business' deliveries continue to expand at recent rates, but it's a risky play.

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

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Keith Noonan 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.