Why Nio stock jumped 17% today

Investors are buying the dip in Nio stock ahead of an important product launch.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Nio (NYSE: NIO) stock made a dramatic U-turn today after yesterday's plunge, popping 16.7% by market close. Although the markets remain choppy, investors in the electric vehicle (EV) stock are excited about an event coming up tomorrow (US time), June 15.

So what

Nio will hold a product launch event tomorrow and although the company hasn't specified what product will hold the spotlight, it should be its ES7 SUV. Nio released a teaser video of the new model today, giving a sneak peek into its camera and lidar sensor system.

It's an important event as Nio has been postponing ES7's launch since April amid COVID-19 restrictions in China. ES7 will be Nio's sixth EV and is a mid-to-large-size five-seater SUV, between the ES6 and ES8.

That may raise concerns about market cannibalization where the new product could eat into the demand for existing ones instead of creating fresh demand for the company. ES7, though, is smaller than ES8 and will likely be priced higher than ES6. Pricing could make all the difference here which is why it's important to consider what Nio announces tomorrow.

Note that ES6 is also Nio's lowest-priced trim and made up the bulk of its deliveries in the first quarter. Adding a more expensive model, therefore, could also help Nio bump up its average selling prices in the coming quarters, provided the new model receives a warm reception from consumers. Importantly, Nio is expected to start deliveries of the ES7 crossover as early as August.

Now what

Nio's first-quarter numbers failed to impress the market but the EV maker expects its deliveries and margins to bounce back. ES7 will likely contribute to that rebound.

Nio may be facing some headwinds but these appear to be near-term blips and I wouldn't be surprised to see more buying coming in the growth stock. The EV maker, after all, is looking forward to a much stronger second half of the year and is working on its ambitious long-term plans that include the launch of an affordable mass-market EV by 2024.

I consider Nio one of the top growth stocks to buy on any dip, and that's exactly what investors appear to be doing today.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Nio Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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