As we enter the last month of the year, it’s perhaps the right time to start shortlisting stocks for the new year. Despite all the chaos this year, the market has fared pretty well thanks to a skyrocketing rally in tech stocks.
The upcoming year could be bullish for major sectors as the widespread distribution of a highly effective vaccine is expected to spark a rapid economic recovery. Experts believe that the economy will witness a V-shaped recovery. Morgan Stanley CIO Mike Wilson, who called the October pullback, has recently said that “the worst of the sell-off is over, and investors should buy stocks before prices rise in 2021.”
Hence, fundamentally-sound stocks could see significant upside in the coming year. Here are three such stocks that could surge in the new year: NIO Inc. (NIO), Plug Power Inc. (PLUG) and Silvergate Capital Corp (SI).
NIO Inc. (NIO)
NIO is a Shanghai-based electric vehicles producer known as the “Tesla of China.” The company designs, manufactures, and sells premium cars under the ES8, EVE, and EP9 brand names. It is also involved in the provision of energy and service packages to its users developing e-powertrains, battery packs, and other components. NIO has a strategic collaboration with Mobileye N.V. for the development of automated and autonomous vehicles.
NIO delivered 5,055 vehicles in October 2020 alone, recording a fresh monthly high with an increase of 100.1% year-over-year. The company has delivered 31,430 vehicles so far this year, rising 111.4% compared to the same period last year. Cumulative deliveries of ES8, ES6 and EC6, as of October 31, 2020 reached 63,343.
Total revenue increased 146.4% year-over-year to $666.6 million in the third quarter of 2020. Vehicle margin came in at 14.5%, compared to the quarter-ago value of 9.7%. NIO is still not generating profit. However, quarterly losses per share continue to narrow. The company reported an adjusted loss of $0.82 per share for the quarter, significantly improving from the quarter-ago loss of $1.08 per share.
NIO is immensely benefiting from its innovative Battery as a Service (BaaS) subscription model. The company has recently launched the 100kWh battery pack with battery upgrade plans. The cell-to-pack battery pack has realized 37% higher energy density than the previous 70kWh battery. Moreover, NIO is planning to launch its EVs in the European market by 2021. Hence, the market expects the company’s revenue to increase 116.2% in the current year and 87.1% next year. NIO’s EPS is expected to grow 58% in the current year and 31.7% next year.
How does NIO stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #3 out of 115 stocks in the China group.
Plug Power Inc. (PLUG)
PLUG is an alternative energy technology provider that engages in the design, development, manufacture, and commercialization of fuel cell systems for the industrial off-road markets worldwide. It provides hydrogen fuel cell turnkey solutions for the electric mobility and stationary power markets.
PLUG has been on an expansion spree lately. The company recently announced the pricing of an upsized offering of its common stock worth $845.5 million, at an 11% discount to PLUG’s closing price, on the announcement day. The company expanded its CE-certified GenDrive product line last month with the addition of three new fuel cell solutions designed for European industrial and material handling vehicles. Additionally, PLUG completed acquisitions of United Hydrogen and Giner Elx in the second quarter to accelerate its green hydrogen strategy.
PLUG generated a net revenue of $107 million in the third quarter, increasing 18% year-over-year, as gross billings of $125.6 million grew 73.4%, sequentially. The company deployed another record 4,100 fuel cell system and 13 hydrogen fueling stations in the quarter. This reflects year-over-year growth of 130% for fuel cell units deployed. However, the company is still not profitable, and reported a loss of $0.11 per share, compared to the year-ago value of $0.08 per share.
PLUG has efficiently managed and grown the capability of its supply chain to meet increased volumes, while reducing costs. Moreover, the company is making big moves by signing new collaborations, including the MOU signed with Linde in September. Analysts expect PLUG’s revenue to increase 36.8% in the current year and 37% next year. The company’s EPS is expected to grow 13.9% in the current year and 22.6% next year.
It’s no surprise that PLUG is rated a “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Peer Grade and Buy & Hold Grade, and a “B” for Industry Rank. Among the 59 stocks in the Industrial – Equipment industry, it’s ranked #6.
Silvergate Capital Corp (SI)
SI operates as a bank holding company for Silvergate Bank that provides banking products and services to business and individual clients in the United States and internationally. The company focuses on innovative financial infrastructure solutions and services for participants in the nascent and digital currency industry. SI has more than 925 digital currency customers that are using its platform daily to grow and scale their businesses.
SI has significantly grown its key asset in the past two years, the Silvergate Exchange Network (SEN), a virtually instantaneous payment network using the company’s application programming interface (API). SI recently achieved $100 billion in transfer volumes across its SEN platform. The bank added 47 new digital currency clients in the last reported quarter and has 200 cryptocurrency clients in the pipeline, or onboarding process.
Deposit related fees from digital currency customers were $3.3 million in the third quarter, increasing 36% year-over-year with 68,361 transactions handled by the SEN. The SEN handled $36.7 billion of US dollar transfers in the quarter, an increase of 252% compared to the year-ago value of $10.4 billion. Digital currency deposits grew $586 million sequentially to $2.1 billion. Total loans were $1.4 billion, rising 39.7% compared to the year-ago quarter. Moreover, non-performing assets declined significantly to $4.13 million compared to the year-ago value of $6.79 million. EPS for the quarter came in $0.37, rising 27.6% sequentially.
SI is witnessing an exponential growth in digital deposit from firms and institutional investors in the cryptocurrency industry. The increased price and volatility in Bitcoin are allowing near zero cost deposits for SI’s securities and loans portfolio. Hence, the market expects the company’s revenue to increase 23.7% in the current quarter and 7.2% next year. SI’s EPS is expected to grow 84.2% in the current quarter and 3.2% next year.
SI’s strong momentum is reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” in Trade Grade, Buy & Hold Grade and Peer Grade. It is also the #12 ranked stock in the Pacific Regional Banks industry.
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NIO shares were trading at $53.56 per share on Monday afternoon, up $4.31 (+8.75%). Year-to-date, NIO has gained 1,232.34%, versus a 12.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
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|PLUG||Get Rating||Get Rating||Get Rating|
|SI||Get Rating||Get Rating||Get Rating|