In 2020, stocks in the electric vehicle (EV) industry have had an impressive run. EV stocks have beaten the overall market handily, as investors expect them to disrupt the way we travel in the upcoming decade.
While shares of Tesla (TSLA) are up 635% in 2020, NIO (NIO) is up 960% year-to-date and XPeng (XPEV) has also surged 105% since its IPO in August. NIO and XPeng are targeting the rapidly expanding market in China which is also the largest market for electric vehicles in the world.
Investors might be worried that the massive uptick in 2020 might be unsustainable and should expect a correction. However, NIO is trading 23% below its record high while XPeng has lost 40% in market value since November.
Let’s take a look at which between NIO and XPeng is a better buy right now.
NIO is one of the top EV companies in China, where the government is encouraging the adoption of clean energy and providing several subsidies. According to Bank of America (BAC), NIO and Tesla account for close to 90% of the premium EVs sold in China which means these two giants are raking in profits where it matters.
In November, NIO delivered 5,291 vehicles, which was a growth of 100% year-over-year. The company is in fact forecast to double its deliveries in 2021 and might even touch the 100,000-figure next year. In the first 11 months of 2020, NIO has delivered 36,721 vehicles, up 111% year-over-year.
Its delivery figures in Q3 were up 154% at 12,206 and NIO aims to deliver between 16,500 vehicles and 17,000 vehicles in Q4.
NIO stock is valued at a market cap of $61.5 billion, indicating a forward price to sales multiple of 25.6x. The company is still unprofitable and Wall Street has a 12-month average target price of $37.74 which is 16% below its current price.
XPeng is another China-based EV company and its deliveries in Q3 soared 266% year-over-year to 8,578. This also indicated a sequential growth of 166%. This drove company sales higher by a stellar 342% to $293.1 million in Q3. In Q4, XPeng expects sales to rise by 244% and is estimated to deliver approximately 10,000 vehicles.
XPeng said it will raise $2 billion in equity capital which will be used to fund growth and invest in research & development. A portion of this capital will be used for sales & marketing, and working capital requirements too.
XPeng sales were just $1 million in 2018 and this figure is forecast to touch $831 million in 2020 and $4 billion by 2022, according to Wall Street analysts. These enviable estimates make XPeng one of the most attractive growth stocks in the EV space right now.
XPeng stock is valued at a market cap of $31.5 billion, indicating a forward price to sales multiple of 38x. Similar to NIO, XPeng is also unprofitable but is predicted to grow sales at a faster pace next year.
Analysts have a 12-month average target price of $52 for XPeng which is 16% higher than its current price.
EV sales in China are estimated to grow at an annual rate of 43% in the next five years. This trend is likely to be observed all around the world. While NIO stock is trading at a lower valuation, XPeng’s recent decline in stock price and higher growth numbers make it a better buy right now.
Want More Great Investing Ideas?
NIO shares were trading at $41.92 per share on Friday afternoon, down $3.30 (-7.30%). Year-to-date, NIO has gained 942.79%, versus a 15.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|NIO||Get Rating||Get Rating||Get Rating|
|XPEV||Get Rating||Get Rating||Get Rating|