Shares of electric vehicle (EV) companies such as Tesla (TSLA) and NIO (NIO) were on an absolute tear in 2020. While TSLA stock surged 743% in 2020, NIO stock was up a staggering 1,110%. However, NIO shares fell off a cliff last year and are currently down 68% from all-time highs. Comparatively, Tesla stock is trading 18% below record highs.
The EV market continues to expand rapidly, making both Tesla and NIO top long-term bets. Gartner projects that in 2022, 6 million electric cars (battery electric and plug-in hybrid) will be shipped, up from 4 million in 2021.
So, let’s see which of these two EV giants should be part of your portfolio right now.
Tesla delivered 936,000 vehicles in 2021, which was an increase of 87% year over year. We can see the demand for EVs remain solid and Tesla aims to meet delivery targets by expanding manufacturing capabilities. It recently added two gigafactories in Berlin and Texas to increase vehicle production.
Tesla is also reporting consistent profits and ended 2021 with a gross margin of 29.3%. Comparatively, the automobile giant reported a gross margin of just 16% in its most recent quarter. As the adoption of electric vehicles is poised to gain momentum, the profit margins might improve over time. Tesla already increased adjusted earnings by a staggering 666% to $4.90 per share in 2021.
Tesla has already widened its product portfolio to accommodate solar roof deployments (up 68%) and battery storage deployments (up 32%), thereby widening its revenue base.
Tesla is on track to increase vehicle deliveries by 50% in 2022 making it among the best growth stocks trading on the S&P 500.
NIO investors have seen a steep decline in share prices due to a variety of reasons. First, the supply chain constraints impacting semiconductor chip customers have delayed expansion plans and vehicle deliveries for Nio and peers.
Second, the high valuation surrounding growth stocks has sent share prices lower at an accelerated pace. And finally, investors are worried about the delisting of China-based stocks from U.S. exchanges resulting in a sell-off.
Despite these headwinds, NIO increased vehicle deliveries to 25,000 units in Q4 of 2021, compared to just 4,000 units in Q1 of 2020. The company’s management is confident of increasing annual vehicle shipments to 600,000 by the end of 2022, which suggests NIO should ship 50,000 vehicles in the month of December.
NIO continues to expand its product portfolio and recently launched two new sedans with a range of 621 miles given a battery upgrade. Its battery-as-a-service program is gaining traction as customers enrolled in the plan are eligible for a discount when they purchase a vehicle. NIO derives a steady stream of revenue from its BaaS vertical and this business will be a key revenue driver for the company in the following years.
Tesla, with a market cap of $1.04 trillion, is forecast to increase sales by 55.4% to $83.65 billion in 2022 and by 26.3% to $106 billion in 2023. Comparatively, its adjusted earnings are forecast to rise by 56.5% to $10.61 per share this year, indicating a forward price to sales multiple of 12 and a price to earnings multiple of 95 which is steep.
Comparatively, NIO is valued at $34.6 billion, by market cap and its sales might rise by 70% to $9.65 billion this year and by 57% to $15.16 billion in 2023. Analysts expect NIO to report adjusted earnings of $0.12 per share in 2023, compared to a loss per share of $1.06 in 2021. And NIO stock is valued at a forward price to sales multiple of 3.7x, which is cheap compared to Tesla. Therefore, I believe NIO is currently the better investment due to its attractive valuation and massive upside potential.
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TSLA shares were trading at $1,077.36 per share on Monday afternoon, up $66.72 (+6.60%). Year-to-date, TSLA has gained 1.95%, versus a -4.80% 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...
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