There’s a good-news, bad-news situation with China-based electric vehicle (EV) manufacturer Nio (NYSE: NIO ). The bad news is that some analysts reduced their price targets on NIO stock, and the company’s financial stats have some sore spots. Yet, there are also some highly encouraging data points to consider. Furthermore, potentially positive news from China could benefit Nio and its stakeholders.
Investing in Chinese stocks hasn’t been easy in 2022. Holding shares of EV manufacturers has also been challenging. All in all, Nio’s shareholders have been on a bumpy ride.
This doesn’t mean it’s time to bail, however. Nio doesn’t have to be a perfect business, as long as it’s growing and improving. The automaker’s story is still unfolding — and by 2025, the Nio share price will probably be much higher than it is today.
News From China Could Buoy NIO Stock
You may recall Oct. 24 as one of the worst days for U.S.-listed Chinese stocks in recent memory. In fact, it was the steepest single-day decline for Hong Kong-listed stocks since 2008.
None of this was Nio’s fault, of course. The selloff occurred because Chinese President Xi Jinping secured a third term. He’s known for imposing harsh Covid-19 restrictions, and this could hamper businesses like Nio.
The selloff might have been overdone, though. In early November, citing “three sources familiar with the matter,” Reuters reported that China “may soon further shorten quarantine requirements for inbound travellers.”
Then, just recently, the Wall Street Journal reported that China’s government eased some of its zero-Covid policies. So, perhaps the fears of an overly restrictive Chinese government were overstated, and Nio may have an opportunity to thrive as a business in the coming years.
Impressive Vehicle-Sales Growth Bodes Well for Nio
Meanwhile, Nio recently disclosed its unaudited third-quarter 2022 financial and operational results. Given its current vehicle-sales growth rate, Nio should be a much bigger company in 2025.
Don’t misunderstand — Nio’s quarterly results weren’t perfect. The automaker sustained a net earnings loss in Q3, and Nio’s gross margin contracted on a year-over-year (YOY) timeframe.
It’s possible that Mizuho analyst Vijay Rakesh had these issues in mind when he reduced his price target on NIO stock from $40 to $34. Bank of America analyst Ming Hsun Lee also published a price-target cut on Nio shares, in this instance from $16 to $15.
If those price-target reductions are deal-breakers for you, that’s a shame, because there’s more to the story. During the third quarter of 2022, Nio’s vehicle sales jumped 38.2% YOY to the equivalent of around $1.678 billion. Moreover, the company delivered 10,059 vehicles in October 2022, indicating a jaw-dropping 174.3% YOY increase.
Looking ahead to the fourth quarter, Nio expects to deliver between 43,000 and 48,000 vehicles, which would represent YOY growth of around 71.8% to 91.7%. Also for Q4, Nio anticipates YOY revenue improvement of roughly 75.4% to 94.2%, to a dollar-translated range of between $2.442 billion and $2.703 billion.
NIO Stock Should Reach $100 in 2025
You can worry about some analysts’ price targets if you want to. However, the hard data shows that Nio’s vehicle sales are growing quickly. In addition, Nio expects to increase its vehicle deliveries and revenue YOY during the current quarter.
Frankly, it’s amazing that NIO stock still trades below $15. It appears that the market hasn’t yet priced in the company’s rapid expansion as an EV manufacturer.
That’s fine, as it presents a terrific buying opportunity. The share price won’t likely stay this cheap during the next few years, and $100 in 2025 should reflect Nio’s evolution into an EV-market powerhouse.
V den zveřejnění David Moadel neměla (přímo ani nepřímo) žádné pozice v cenných papírech uvedených v tomto článku. Názory vyjádřené v tomto článku jsou názory autora, s výhradou pokynů pro publikování InvestorPlace.com.
Nio has the right stuff to continue climbing, but just how high can it get?
June 19, 2021 By Luke Lango and the InvestorPlace Research Staff Jun 21, 2021, 5:26 am EST June 19, 2021
Nio (NYSE: NIO ) is China’s leading premium EV maker. The company is often dubbed the “Tesla of China.” It more than lives up to this designation, as it’s been outperforming Tesla stock of late. Even so, we believe Nio stock is undervalued, and that shares of the Chines electric vehicle company could reach $100 and then some.
Zdroj: Sundry Photography / Shutterstock.com
Let’s go back to that Tesla-Nio comparison: Tesla’s worth $580 billion, which compares to Nio’s is $74 billion market capitalization.
While some of that delta can be attributed to Tesla’s solar and energy storage businesses, Nio has neither. That’s okay — because the lion’s share of valuation is reserved for EV domination, and not the ancillary businesses. We see Nio as having the right stuff to dominate the world’s largest market for electric vehicles.
So the right question to ask is: just how high can NIO stock go?
Slow and Steady for Nio Stock
Let’s just get this out of the way: We think Nio’s stock umět dosáhl 100 $.
But there’s a catch … it will take some time for Nio stock holders to see that vaunted $100 per-share figure.
First, let’s try and understand why Nio will be a very dominant global EV maker.
The company has a leading technology platform that is allowing for the creation of super high-performance EVs that are rivaled by only a few competitors in market.
Nio is also leaning into its battery swapping model to reduce the cost of those EVs. It’s therefore one of the best EV makers in the world at optimizing the cost-performance trade-off for consumers. In China, the company has basically already won the battle, because the government has made it clear they are going to support Nio’s growth.
In Europe, the company will soon sell its vehicles in Norway and should soon turn into a big player.
In North America, the road will be longer and tougher, but the company has sufficient technological advantages and strong enough brand equity to at least marginally penetrate the North America EV market.
Čísla
To get to a Nio stock price forecast of $100, we make a few critical assumptions.
First, we assume global EV penetration of the total auto market of 35% by 2030.
We actually think that’s conservative. brod (NYSE: F ), General Motors (NYSE: GM ), A Volkswagen (OTC: VWAGY ) are already targeting 40% to 50% EV penetration in their automobile lines by 2030. So, 35% feels appropriately conservative.
Second, we assume Nio can secure an 8% market share in China. That’s roughly the same percentage of China’s population that are high-income earners. We’re assuming here that Nio dominates the premium EV market in China and is also able to win some share in lower-end markets. This, too, seems appropriate to us given Nio’s “home court advantage.”
Third, we assume Nio can grab hold of about 4% market share outside of China. That’s half the China penetration rate. We think that’s fair, because it accounts for increased competition on a global scale.
Fourth, we assume 25% gross margins for Nio in the long, and a 10% operating expense rate, for 15% operating margins. This is similar to what Tesla is operating at today. We see no reason why Nio can’s tap into the same economies of scale to achieve a similar profitability profile.
Sečteno a podtrženo na Nio Stock
On those major assumptions, our modeling suggests Nio will do about $5.50 in earnings per share by 2030.
Based on a 25X forward earnings multiple, that implies a 2029 price target for Nio stock of nearly $140. Using a 9% discount rate, that implies a 2021 price target of nearly $70.
So, while we think Nio stock is undervalued today and can and will power to $100 over time, we do not think shares will double overnight.
That’s why Nio is currently the top EV stock to buy within my Mobilita nové generace portfolio in Investice do inovací — my flagship subscription newsletter service compiling the world’s top emerging megatrends and best stocks within each.
But it’s far from the only EV stock to buy, and my “Top Stock” designation can change with each month, so that you can make the best decision based on the newest information available at any given time. These companies represent the cream-of-the-crop when it comes to disruptive technological innovation in EVs. With each featuring second-to-none management teams and massive long-term potential.
To learn which company which company will earn the title of my Top Next-Gen Mobility stock next, subscribe to Innovation Investor today. You’ll also learn about my other EV standouts, including a secret startup that’s spearheading the self-driving revolution, a company I consider my EV “sleeper” stock of the decade, and a company pioneering a bleeding-edge solid-state battery solution for the cars of tomorrow.
V den zveřejnění Luke Lango neměl (přímo ani nepřímo) žádné pozice v cenných papírech uvedených v tomto článku.
Odhalením časných investic do hyperprostorových průmyslových odvětví vás Luke Lango umístí do přízemí světově se měnících megatrendů. Je to téma jeho premiérové služby zaměřené na technologie, Investice do inovací. Chcete-li vidět celou řadu Lukových inovativních špičkových akcií, staňte se dnes předplatitelem Innovation Investor.
