Is Nio Stock Really Deserving Of A $100 Billion Valuation?

Nio (NYSE:NIO) inventory has rallied by over 15% during the last week, amid anticipation forward of the corporate’s annual Nio day occasion that was held on Saturday. Nio’s market cap now stands at a whopping $93 billion- virtually as a lot as Common Motors and Ford mixed. Does Nio warrant such a valuation? The corporate is actually rising quick, with Income poised to double to about $5 billion in 2021 with deliveries rising quick (Nio delivered a report 7,000 automobiles in December). The addressable market can be rising shortly, contemplating that China – Nio’s house nation – has set a goal that 25% of automobile gross sales by 2025 have to be new vitality autos that aren’t purely gasoline-driven. That being mentioned, is Nio constructing a aggressive benefit to justify its present valuation and fend off rivals because the market will get extra crowded?

See our evaluation on Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for an summary of the monetary and valuation metrics of three main Chinese language EV gamers.

Nio seems to be innovating in two key areas – particularly battery expertise and self-driving software program, and it is a massive a part of the narrative driving the inventory. Nio is betting massive on modular batteries for its EVs that may be swapped out in a matter of minutes, serving to to scale back vary nervousness whereas offering batteries as a service (BaaS) beneath a subscription program. Nevertheless, that is unlikely to offer the corporate an edge, as different gamers may also simply replicate this. The truth is, China’s EV coverage encourages constructing in battery swapping. EVs priced above RMB300,000 (round $46,000) are granted subsidies provided that they’ve a swapping choice. Nio has additionally unveiled a denser battery pack with 150 kWh of capability (up from 100kWh at the moment). This battery choice will probably be out there solely in late 2022 – virtually 2 years out – and it’s doable that different gamers may even have comparable capability batteries by then, working with mainstream battery cell suppliers comparable to CATL.

The corporate spent a great deal of time throughout its Nio Day occasion discussing the self-driving tech on its new sedan due in 2022 and a associated month-to-month subscription program. The main focus gave the impression to be extra on the {hardware} comparable to high-resolution cameras, lidar sensors, and Nvidia processors – all of that are prone to be out there to most different automakers. Nevertheless, what actually offers corporations an edge in self-driving is the standard of software program and the provision of huge quantities of knowledge (miles pushed) to enhance algorithms.  For perspective, Tesla has logged a complete of three billion autonomous miles as of final April whereas Google’s Waymo logged about 20 million miles. It’s not clear how Nio will fare on these counts.

Total, whereas Nio is actually rising quick, constructing a model that’s changing into synonymous with luxurious Chinese language EVs, its valuation appears wealthy in our view, as we don’t see a sustainable aggressive benefit but. Nio now trades at about 18.6x consensus 2021 Revenues, which signifies that it’s valued equally to dear Tesla (NASDAQ:TSLA), whose sturdy software program and self-driving capabilities partly justify its valuation.

[12/15/2020] Why Has Nio Inventory Been Trending Decrease 

Chinese language premium Electrical car maker Nio (NYSE:NIO) has seen its inventory decline by virtually 20% during the last two weeks, falling to ranges of round $41 per share regardless of posting a robust supply quantity for the month of November with gross sales greater than doubling year-over-year to five,291 models. Whereas a part of the decline is probably going attributable to some revenue reserving after an over 10x rally this 12 months, Nio’s transfer to boost about $2.65 billion by way of a sizeable secondary share providing additionally damage the inventory. The providing was priced at about $39 per American depositary shares (ADS), a reduction to the market value of about $42 as of Friday’s shut. That mentioned, this must be a web optimistic for the corporate within the long-run. The funding nonetheless comes at engaging valuations (Nio trades at a whopping 23x projected 2020 Income, forward of Tesla) and dilution of present shareholders is restricted. Furthermore, the funds ought to give the corporate a cushty money cushion, with the proceeds seemingly for use to fund R&D for brand new autos and autonomous driving expertise and to broaden the corporate’s gross sales community.

[Updated 11/18/2020] Is Nio Overvalued?

Nio (NYSE:NIO) – the premium Chinese language electrical car producer – reported its Q3 2020 outcomes on Tuesday, posting a smaller than anticipated quarterly loss, pushed by report deliveries and better margins. Whereas Revenues rose by 22% sequentially to RMB 4.53 billion (about $667 million), gross margins expanded by about 480 foundation factors to 12.9% pushed by decrease materials value and higher manufacturing effectivity. Nio continues to learn from sturdy demand and incentives for EVs in China, guiding that it may ship between 16,500 to 17,000 autos over This fall. This interprets right into a sequential development of at the very least 35%.

See our evaluation Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? which compares the monetary efficiency and valuation of the foremost U.S. listed Chinese language electrical car gamers.

Regardless of the stronger than anticipated outcomes and This fall steerage, we predict Nio inventory appears overvalued. The inventory is up by over 12x year-to-date and trades at about 27x projected 2020 Revenues. Compared, Tesla – a extra mature EV participant, with strong software program capabilities and rising publicity to China – trades at about 13x projected gross sales. Whereas Nio’s development charges are actually larger than Tesla’s, it is usually riskier contemplating the extraordinary competitors within the Chinese language EV market, which has a number of tons of of producers.

[Updated 11/16/2020] As Nio Inventory Continues To Surge, Are Traders Getting Forward Of Themselves?

Nio (NYSE:NIO) – the premium Chinese language EV producer – has seen its inventory soar a whopping 58% during the last month buying and selling at about $45 per share, pushed by sturdy supply numbers for October and a conducive regulatory atmosphere in China for EVs. After a 12x rally 12 months thus far, Nio’s market cap is now larger than Common Motors (NYSE:GM). Whereas Nio is little question rising shortly, with Income on observe to double this 12 months, the inventory appears overvalued in our view for a few causes. Firstly, there’s a risk that Tesla may give Nio a run for its cash in its house turf, because it prepares to launch a domestically made Mannequin Y SUV, which stories point out might be priced cheaper than Nio’s entry-level SUV ES6, which begins at $54k. Along with a doubtlessly lower cost, Tesla’s stronger model picture and software program options may make its autos rather more engaging to clients. The corporate may additionally face challenges additional scaling up manufacturing. For instance, Nio recalled about 5,000 autos final 12 months after stories of a number of fires. Nio can be very richly valued at about 26x projected 2020 Revenues, in comparison with Tesla which trades at about 12x. Whereas Nio’s development charges are actually larger than Tesla’s, the dangers are additionally larger given the extraordinary competitors within the Chinese language EV area the place there are over 400 producers.

[11/3/2020] Robust October Deliveries Drive Chinese language EV Shares

The inventory costs of main U.S. listed Chinese language electric-vehicle (EV) producers soared on Monday, as they reported sturdy deliveries for  October. Nio (NYSE:NIO) – one of many largest EV startups in China – noticed its inventory soar by about 9%, because it reported that deliveries in October virtually doubled year-over-year to five,055 autos. Xpeng (NYSE: XPEV), one other premium EV participant noticed its inventory rise by about 7%, because it delivered about 3,040 autos by the month, marking a rise of about 230% from a 12 months in the past, pushed primarily by gross sales of its P7 sedan which was launched earlier this 12 months. Nevertheless, deliveries have been barely decrease month-over-month. Li Auto (NASDAQ: LI), an organization that sells EVs that even have a small gasoline engine – mentioned that it delivered 3,692 of its Li ONE SUVs in October, marking a month-over-month improve of about 5%. The corporate started manufacturing solely late final 12 months.

[10/30/2020] How Do Nio, Xpeng, and Li Auto Examine

The Chinese language electrical car (EV) area is booming, with China-based producers accounting for over 50% of world EV deliveries. Demand for EVs in China is prone to stay sturdy because the Chinese language authorities desires about 25% of all new automobiles offered within the nation to be electrical by 2025, up from roughly 5% at current. Whereas Tesla is a pacesetter within the Chinese language luxurious EV market pushed by manufacturing at its new Shanghai facility,  Nio (NYSE:NIO), Xpeng (NYSE: XPEV), and Li Auto (NASDAQ: LI) – three comparatively younger U.S. listed Chinese language electrical car gamers, have additionally been gaining traction. In our evaluation  Nio, Xpeng & Li Auto: How Do Chinese language EV Shares Examine? we evaluate the monetary efficiency and valuation of the foremost U.S. listed Chinese language electrical car gamers. Elements of the evaluation are summarized under.

Overview Of Nio, Li Auto & Xpeng’s Enterprise

Nio, which was based in 2014, at the moment presents three premium electrical SUVs, ES8, ES6, and EC6, that are priced beginning at about $50k.  The corporate is engaged on growing self-driving expertise and likewise presents different distinctive improvements comparable to Battery as a Service (BaaS) –  which permits clients to subscribe for automobile batteries, somewhat than paying for them upfront. Whereas the corporate has scaled up manufacturing, it hasn’t come with out challenges, because it recalled about 5,000 autos final 12 months after stories of a number of fires.

Li Auto sells Prolonged-Vary Electrical Autos, that are primarily EVs that even have a small gasoline engine that may generate further electrical energy for the battery. This reduces the necessity for EV-charging infrastructure, which is at the moment restricted in China.  The corporate’s hybrid technique seems to be paying off – with its Li ONE SUV, which is priced at about $46,000 – rating because the top-selling SUV within the new vitality car section in China in September 2020. The brand new vitality section contains gasoline cell, electrical, and plug-in hybrid autos.

Xpeng produces and sells premium electrical autos together with the G3 SUV and the P7 four-door sedan, that are roughly positioned as rivals to Tesla’s Mannequin Y SUV and Mannequin 3 sedan, though they’re extra inexpensive, with the essential model of the G3 beginning at about $22,000 publish subsidies. The G3 SUV was among the many prime 3 Electrical SUVs by way of gross sales in China in 2019. Whereas the corporate started manufacturing in late 2018, initially by way of a cope with a longtime automaker, it has began manufacturing at its personal manufacturing facility within the Guangdong province.

How Have The Deliveries, Revenues & Margins Trended

Nio delivered about 21k autos in 2019, up from about 11k autos in 2018. This compares to Xpeng which delivered about 13k autos in 2019 and Li Auto which delivered about 1k autos, contemplating that it started manufacturing solely late final 12 months. Whereas Nio’s deliveries this 12 months may strategy about 40k models, Li Auto and Xpeng are prone to ship round 25k autos with Li Auto seeing the very best development. Over 2019, Nio’s Revenues stood at $1.1 billion, in comparison with about $40 million for Li Auto and $330 million for Xpeng. Nio’s Revenues are prone to develop 95% this 12 months, whereas Xpeng’s Revenues are prone to develop by about 120%. All three corporations stay deeply lossmaking as prices associated to R&D and SG&A stay excessive relative to Revenues. Nio’s Internet Margins stood at -195% in 2019, Li Auto’s margins stood at about -860% whereas Xpeng’s margins stood at -160%. Nevertheless, margins are seemingly to enhance sharply in 2020, as volumes decide up.

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Nio’s Market Cap stood at about $37 billion as of October 28, 2020, with its inventory value rising by about 7x year-to-date attributable to surging investor curiosity in EV shares. Li Auto and Xpeng, which have been each listed within the U.S. round August as they appeared to capitalize on surging valuations, have a market cap of about $15 billion and $14 billion, respectively. On a relative foundation, Nio trades at about 15x projected 2020 Revenues, Li Auto trades at about 12x, whereas Xpeng trades at about 20x.

Whereas valuations are actually excessive, traders are seemingly betting that these corporations will proceed to develop within the home market, whereas ultimately enjoying a bigger function within the international EV area leveraging China’s comparatively low-cost manufacturing, and the nation’s ecosystem of battery and auto elements suppliers. Of the three corporations, Nio could be the safer guess, contemplating its barely longer observe report, larger Revenues, and investments in expertise comparable to battery swaps and self-driving. Li Auto additionally appears engaging contemplating its speedy development – pushed by the uptake of its hybrid powertrains – and comparatively engaging valuation of about 12x 2020 Revenues.

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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.

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Huynh Nguyen

My name is Huynh and I am a full-time online marketer.

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