Stock investment is a crucial decision and needs thorough research to ensure profits. 

For instance, if you are thinking it is it worth to invest in nio stock, then understanding its pros and cons is essential. 

In this article, we will discuss it all and help you to make an informed decision.

The Chinese electric car company Nio released its second-quarter earnings reports, and it was noticed that the stocks are still losing money. However, the losses were not as high as the analysts actually expected. It lost around 16 cents per American dollar against the estimated loss of 26 cents per share. The company’s revenue was also higher at $526.4 million against the estimated $504 million.

From the earning reports of this quarter, it seems that the Nio stocks were recovering pretty quickly. This is a positive development from the cash flow issue that the company ran into this year. However, the stock still fell after the earnings call, and thus it is essential to analyze the pros and cons before you actually invest in its stocks.

The pros of investing in Nio stocks

• Ramped-up deliveries - There has been an increase in deliveries of Nio vehicles during its second quarter. It delivered 10,331 vehicles which was a 191 percent increase from their last year's stats. The company has increased its production significantly and demand for the cars has also gone up. The strong delivery numbers of the company have led to increased efficiency and cost control, which is a positive sign.

• Increase in cash flow - Early last year, the company ran into a significant cash flow problem. The issue was so intense that the company ended up paying its employees six days late. The company also offered bonuses to the employees in the form of stock units. However, the situation improved soon as the company received a large cash infusion from Tarcent Holdings. By the end of June, the company had more than $1.6 billion in cash and equivalent.

• Promising third-quarter- The company took its growth in the second quarter very seriously, and they expect it to continue in the third quarter. The electric vehicle giant expects to deliver around 11,000 to 11,500 vehicles during this quarter and expects revenues between $572.9 million to $596.2 million. This can be a huge improvement compared to the situation the company was in last year.

The cons of investing in Nio Stocks

• Are the shares overvalued?

The Nio stocks are up by more than 322 percent from the last year, which is pretty expensive by traditional valuation metrics. It is one of the reasons why experienced analysts gave Nio a sell rating. They are quite cautious when it comes to the Nio stocks as the increased values reveal over-optimism.

• Is it profitable enough?

Even though the deliveries of the company are increasing, and the quarterly results showed some positive signs, the fact remains that the company is still not very profitable. And even though the company is showing potential to gain profit in the future, it would take some time for it to get to the right spot.

• Will its momentum last long?

Only a year earlier, analysts suspected that the electric vehicle giant might go bankrupt. However, it showed fantastic growth and came up with higher deliveries and great revenue. But some experts believe that the growth of the company in the second quarter was by a fluke. Hence, even though it is very encouraging to see the growth of Nio, analysts are still skeptical about the prospects of its long-term growth. Experienced investors are not sure if the company will be able to hold on to this momentum.

Final words

It can be said that Nio is in a great financial position in the current times. The deliveries are increasing, the demand is quite high and hence the sales are skyrocketing too. Its shares are also high, around 231 percent more compared to the share price last year. But, the stock is overvalued, and Nio is yet to prove whether it will be able to hold on to the growth in the long term. So, it should be mentioned that Nio stocks might be a good investment, but you must also be well aware of the risks of stock investment.