Growth stocks are making 2023 a great year, and Nio (NYSE:NIO) stock is no exception.

The company’s market cap has risen to more than $13 billion on the back of strong fundamentals and a positive outlook.

Revenue from its passenger car business grew by 71% in the first quarter compared to the previous year, and that’s just one metric that’s pointing in the right direction right now.

While many investors may look to Tesla (NASDAQ:TSLA) and other EV companies for leadership, there are other options to consider. This Chinese EV player may be overlooked and undervalued relative to its growth prospects over the long-term.

With that said, let’s dive into why NIO stock could be a great pick right now.

Recent News Provides Boost for NIO stock

NIO stock has been trading mostly on a downtrend for the better part of two years. However, an announcement that the Chinese government would extend tax exemptions for electric vehicles may interest investors.

Unfortunately, this news followed disappointing May delivery figures that had caused an initial decline in NIO stock. Nio’s May sales were less than half of its December sales.

Nio, often referred to as the “Tesla of China,” has made its mark in the EV industry by emphasizing premium electric vehicles and services.

In Q1 2023, NIO achieved an impressive delivery of 31,041 vehicles. Analysts project a substantial 95% upside potential for the stock, driven by optimistic management guidance and the anticipated economic rebound in China.

Nio Appears on Track for a Rebound

Nio’s stock price has seen a downward trend in recent months, with a 10% decline over the past month and a 39% decline year-over-year, at the time of writing.

Despite this backdrop, the stock’s current trading price of just above $8 presents a favorable entry point for investors, especially considering the stock’s low valuation of 1.8-times revenue. This volatility creates an opportunity for potential gains.

Valuing companies that consistently incur losses can be challenging. However, when a company achieves its first break-even point, it often leads to a positive reevaluation.

NIO, though not expected to turn profitable until 2026 (originally anticipated for 2025), experienced delays due to China’s Covid lockdown, impacting its development trajectory.

In 2024, NIO is projected to report a loss of $0.31 per share, while the current stock price stands just above $8. Although the margin is narrow, with favorable factors, there is a possibility of reaching the breakeven point next year.

NIO is anticipated to generate the highest revenue among China’s three emerging EV companies, namely Li Auto and XPeng, with an estimated revenue of $17.6 billion in the coming year.

What Now?

Nio is capitalizing on several favorable factors. It is expanding with a new factory targeting European EV exports and has a mass-market product in the works.

The company’s accelerating car deliveries are expected to drive robust revenue growth in 2023.

Nio has an extensive lineup of eight models, with five upcoming launches that will provide customers with a wider range of options across different price points.

Nio’s strength in the EV sector is further reinforced by its battery-swapping stations. Overall, this development makes Nio a promising long-term investment with significant potential for growth and value appreciation.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.