For its part in the electric vehicle revolution, Chinese EV manufacturer NIO Limited (NIO) is leaving no stone unturned to expand its market share internationally. At a time when the Chinese government is cracking down on the country’s largest conglomerates, which are facing allegations of being monopolistic, NIO’s budding status, and the global economy’s supportive approach towards clean energy, have been driving the company’s growth.
NIO’s technological dexterity has made it one of the leading companies in the sector, despite being a relatively newer player. At its annual event on January 9, it is expected to launch a self-driving electric sedan, along with a 150kwh-hour battery pack that will improve driving distances between charges. Since the announcement of NIO Day on January 3, the stock has gained 3.6%, reflecting investor optimism about the launch of new products.
Wall Street analysts expect NIO’s stock to gain 405.5% to hit $268.94. This is not surprising, considering the company’s impressive performance last year. Record vehicle deliveries and technological innovations have driven the stock to a gain of 1272.3% over the past year. This, combined with other factors, has helped NIO earn a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates NIO:
Trade Grade: A
NIO is currently trading above its 50-day and 200-day moving averages of $47.58 and $26.59, respectively, indicating a golden-cross uptrend. Moreover, the stock has gained 144.3% over the past three months, reflecting solid short-term bullishness.
NIO delivered more than 7,000 vehicles in December, up 121% year-over-year. Deliveries for the third quarter ended December 31, 2020 have increased 111% from the year-ago value to 17,353 vehicles.
NIO raised approximately $2.65 billion through an American Depositary shares offering last month. Given the substantial market demand for the stock, underwriters exercised a Greenshoe option to issue 10.20 million additional ADS.
In November, NIO launched a 10-kWh battery with upgrade plans. With 37% higher energy density, the new battery is expected to boost NIO vehicles hit a range of up to 615 km, while improving space utilization by 19.8%. This should boost the demand for the batteries for upgrading, as well as for newer NIO models.
The company’s total revenues have increased 146.4% year-over-year to RMB 4.53 billion in the third quarter ended September 30, 2020. Vehicle sales grew 146.1% from the same period last year to RMB 4.27 billion. And gross profit rose significantly over this period to RMB 585.80 billion, compared to negative year-ago value.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers , NIO is well positioned. It is currently trading just 11.7% below its 52-week high of $57.20, which it hit on November 24.
The stock has gained 1272.3% over the past year owing to impressive revenue growth over this period. NIO’s revenue has increased 48.2% year-over-year.
The company has delivered promising results since its inception almost seven years ago. It is battery-as-a-service subscription plans have been a huge commercial success, making its EVs more cost effective and more resilient. These factors have earned NIO the moniker the “Tesla of China”.
Peer Grade: A
PDD, JD and BIDU have gained 340.9%, 132.1% and 50%, respectively, over the past year. This compares to NIO’s 1272.3% returns over this period.
Industry Rank: B
The China group is currently ranked #38 of 123 StockNews.com industries. While China’s impressive revival from the coronavirus pandemic-induced economic recession has been commendable, brewing anti-Chinese sentiment across the globe coupled with sour U.S.-Sino relations has slowed the growth momentum of Chinese stocks domestically.
Chinese companies listed on U.S. stock exchanges are expected to gain momentum soon because the Congress formally acknowledged Biden’s win today. The new administration is likely to establish a more congenial economic relationship with China, allowing Chinese companies to operate more smoothly on U.S. soil.
Overall POWR Rating: B (Buy)
NIO is rated “Buy” due to solid short- and long-term bullishness, impressive financials, and growth momentum, as determined by the four components of overall POWR rating.
Investors and analysts are optimistic regarding NIO’s prospects, given the company’s innovation and unique business model. NIO’s flagship Sedan and more highly efficient battery packs are expected to be on par with industry leaders in terms of performance. However, NIO’s cost-effective products should allow its revenue to grow substantially in the future, particularly as many countries are now planning to ban the sale of gasoline-powered cars.
The company’s EPS is expected to rise 76.9% in the fourth quarter ended December 31, 2020, and 45.9% in fiscal 2021. The company has an impressive earnings surprise history; it beat the Street EPS estimates in three of the trailing four quarters. A consensus revenue estimate of $992.12 million for the about-to-be reported quarter represents a 143.8% gain year-over-year.
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NIO shares were trading at $54.28 per share on Thursday afternoon, up $3.78 (+7.49%). Year-to-date, NIO has gained 11.37%, versus a 1.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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