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NIO Stock: EV Maker Enjoys China’s Support

I am neutral on NIO Inc. (NIO), as its rich valuation offsets its massive growth potential. NIO is a pioneer in China’s smart and high-tech luxury EV market. The company is a major...
NIO Stock: EV Maker Enjoys China’s Support © Reuters. NIO Stock: EV Maker Enjoys China’s Support

I am neutral on NIO Inc. (NIO), as its rich valuation offsets its massive growth potential.

NIO is a pioneer in China’s smart and high-tech luxury EV market. The company is a major innovator in next-generation technologies, including autonomous driving and artificial intelligence, which it offers at a lower price point than its direct competitors like Tesla (NASDAQ:TSLA).

In addition, the Chinese government has a vested interest in NIO’s growth, and strives to make it a leader in the EV marketplace. (See NIO stock charts on TipRanks)

Strengths

As a young and fast-growing company, NIO's sales more than doubled in 2020. The company prides itself on its continuous innovations, including its premier battery swapping technologies, Battery as a Service (BaaS), and Autonomous Driving as a Service (ADaaS).

It is worth noting that NIO came to the brink of bankruptcy last year while fighting the COVID-19 pandemic.

However, NIO has enjoyed strong support from the Chinese government, and was able to secure $1 billion in financing, which is expected to remain an important source of funding for the company in financially challenging times.

Recent Results

NIO achieved a record-high delivery of 21,896 vehicles in the second quarter of 2021, as well as 7,931 vehicles in July, bringing its total vehicle deliveries to 125,528 as of July 31, 2021.

The company’s revenue grew to $1.3 billion, up by 127% year-over-year, and 5.8% sequentially.

Amid stiff competition, NIO has significantly ramped up its production over the past year and is speeding up the launch of three new vehicles in 2022, including the ET7, a flagship high-end smart electric sedan.

In Q2 2021, vehicle margin reached 20.3% (compared with 9.7% in the second quarter of 2020), while gross margin reached 18.6% (compared with 8.4% in the second quarter of 2020).

Shares of NIO have outperformed the broader market over the past year, as the company overcame its debt and liquidity fears. Going forward, the company will face a number of challenges, including the global shortage of semiconductor chips, as well as potential tech regulations in China.

Valuation Metrics

NIO stock is quite expensive, based on its current forward-looking multiples. The price-to-cash flow ratio is quite rich at 161.9x, and the stock is still running up severely negative EBITDA, free cash flow, and normalized earnings. That said, the forward enterprise value to revenues is actually quite reasonable at 8x.

Revenue is expected to grow at a rapid rate for the foreseeable future, as it is projected to see 123.6% year-over-year growth in 2021, and 66.6% growth in 2022.

With NIO's international growth just beginning to take off, and the company currently investing in aggressively growing its Battery as a Service business, revenue could have additional tailwinds in the near future.

Wall Street’s Take

From Wall Street analysts, NIO earns a Strong Buy analyst consensus, based on six unanimous Buy ratings. The average NIO price target of $67.52 puts the upside potential at 79.3%.

Summary and Conclusions

NIO is an emerging leader in EV and BaaS technology. Thanks to its very robust home market and international growth potential, the company could see massive growth in the foreseeable future.

That said, the stock is still a ways off from profitability, and trades at a pretty hefty valuation at the moment. As a result, it might be prudent to wait for a sell-off before purchasing shares.

Disclosure: On the date of publication, Samuel Smith had no position in any of the companies discussed in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

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22-09-2021 09:56:19 (UTC+7)

EUR/USD

1.1725

+0.0003 (+0.02%)

Summary

Neutral

Moving Avg:

Buy (3)

Sell (9)

Indicators:

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Sell (2)

EUR/USD

1.1725

+0.0003 (+0.02%)

Summary

Neutral

Moving Avg:

Buy (3)

Sell (9)

Indicators:

Buy (6)

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GBP/USD

1.3661

+0.0001 (+0.01%)

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↑ Sell

Moving Avg:

Buy (2)

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USD/JPY

109.43

+0.21 (+0.20%)

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Buy

Moving Avg:

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AUD/USD

0.7250

+0.0019 (+0.27%)

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↑ Buy

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USD/CAD

1.2792

-0.0023 (-0.18%)

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↑ Sell

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EUR/JPY

128.30

+0.28 (+0.21%)

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Buy

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EUR/CHF

1.0834

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Silver Futures

22.805

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4.2245

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71.14

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74.89

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US Coffee C Futures

183.70

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Euro Stoxx 50

4,097.51

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4,354.18

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DAX

15,348.53

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FTSE 100

6,980.98

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↑ Buy

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24,221.54

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US Small Cap 2000

2,190.36

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IBEX 35

8,756.00

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BASF SE NA O.N.

62.280

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Bayer AG NA

45.70

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Allianz SE VNA O.N.

187.45

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Adidas AG

281.90

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↑ Sell

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Deutsche Lufthansa AG

8.377

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145.32

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10.095

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 EUR/USD1.1725Neutral
 GBP/USD1.3661↑ Sell
 USD/JPY109.43Buy
 AUD/USD0.7250↑ Buy
 USD/CAD1.2792↑ Sell
 EUR/JPY128.30Buy
 EUR/CHF1.0834↑ Buy
 Gold1,779.45↑ Buy
 Silver22.805↑ Buy
 Copper4.2245Buy
 Crude Oil WTI71.14↑ Buy
 Brent Oil74.89↑ Buy
 Natural Gas4.843↑ Buy
 US Coffee C183.70↑ Buy
 Euro Stoxx 504,097.51↑ Buy
 S&P 5004,354.18↑ Sell
 DAX15,348.53↑ Buy
 FTSE 1006,980.98↑ Buy
 Hang Seng24,221.54Neutral
 Small Cap 20002,190.36↑ Sell
 IBEX 358,756.00Neutral
 BASF62.280↑ Sell
 Bayer45.70↑ Buy
 Allianz187.45↑ Buy
 Adidas281.90↑ Sell
 Lufthansa8.377↑ Sell
 Siemens AG145.32↑ Sell
 Deutsche Bank AG10.095Buy
Mua/Bán 1 chỉ SJC
# So hôm qua # Chênh TG
SJC Eximbank5,660/ 5,710
(10/ 10) # 814
SJC HCM5,650/ 5,715
(5/ 5) # 818
SJC Hanoi5,650/ 5,717
(5/ 5) # 820
SJC Danang5,650/ 5,717
(5/ 5) # 820
SJC Nhatrang5,650/ 5,717
(5/ 5) # 820
SJC Cantho5,650/ 5,717
(5/ 5) # 820
Cập nhật 22-09-2021 09:56:21
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Dầu hỏa1508015380
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WTI$71.06-0.32-0.45%
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Ngoại tệMua vàoBán ra
USD22.630,0022.860,00
EUR26.007,0827.360,60
GBP30.295,3831.561,13
JPY203,28215,04
KRW16,6220,24
Cập nhật lúc 09:54:21 22/09/2021
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