Nio Stock Forecast: NIO shares jump 5% in premarket on Tesla earnings coattails

• Nio stock has advanced more than 5% in the premarket.
• Elon Musk said Chinese EV companies are the 'smartest'.
• Tesla reported Q4 earnings late Wednesday that have buffeted the EV industry.
• NASDAQ futures are up on better than expected GDP data.

Nio (NIO) stock has advanced 5.3% in Thursday's premarket due to Tesla (TSLA), the king of the electric vehicle industry, unveiling results of a bullish fourth quarter late Wednedsay. In line with Tesla stock moving 5.5% higher in the premarket, Nio is experiencing renewed exuberance for the EV sector. Tesla surprised the market as CEO Elon Musk said his car company might deliver 2 million vehicles this year despite recent price cuts that were thought to be a result of lower demand.

Nio is trading at $12.24 before the market open, while the NASDAQ futures have advanced 0.7%, foreshadowing market optimism. This early optimism was then buffered by United States Q4 GDP figures from the Commerce Department showing that the US economy grew at an annualized rate of 2.9%. Consensus had been 2.6%. Where is this recession everyone is talking about?

Tesla earnings news

Tesla was able to beat Wall Street consensus for earnings and registered revenue right in line with expectations for the fourth quarter. The big surprise on the call came from details concerning the EV leader's recent price cuts. CFO Zach Kirkhorn stated that the price-cutting strategy was a means of dealing with tax regulations and was not due to lower demand.

Elon Musk then piped in to say that the price cuts – largely between 6% and 20% – were leading to much higher order volume. Because of it, Musk said Tesla may raise prices slightly in the back half of the year to recapture some margin.

“Thus far in January we’ve seen the strongest orders year-to-date than ever in our history,” Elon Musk said during the earnings call. “We’re currently seeing orders of almost twice the rate of production.”

Tesla still is guiding for 1.8 million units delivered in 2023 despite Elon Musk's bravado. Management conceded that margins would be compressed from the price cuts but said they would also focus on cost cutting. Automotive gross margins excluding emissions credits came in at 24% in Q4, whereas they had been near 29% one year ago.

Nio stock news: Musk says Chinese EV makers work 'smartest'

Nio's top news also involves its major American competitor. During the Tesla earnings call, Elon Musk hyped up Tesla's competitors in China. After an analyst asked about the competition in electric vehicles, Musk chose to point directly at China.

"If I were to guess ... probably some company out of China is the most likely to be second to Tesla,” Elon Musk retorted. 

Tesla faces stiff competition from BYD (BYDDY) and SAIC-GM-Wuling in China but also from growing upstarts like Nio, XPeng (XPEV) and Li Auto (LI). The latter two saw their shares rise more than 5% as well.

“We have a lot of respect for the car companies in China, " Elon Musk added. "They are the most competitive in the world. [...] They work the hardest, and they work the smartest."

Nio stock forecast

Trading around $12.30 in Thursday's premarket, NIO stock is now near the high from Monday. In that session NIO traded up to $12.34 but was quickly pushed lower, so there seems to be some level of resistance here. Bulls will still focus on Tuesday's high of $12.92. That is the primary goal in Thursday's session for most traders. Beyond there is the resistance zone that ranges from $13.24 to $13.32. This area kept bulls in check on several occasions between November 30 and December 13 of last year. Notice, however, that NIO stock is now trading into overbought territory, which has typically resulted in fairly quick reversals in the past.

NIO 4-hour chart