2021 is proving to be less of a free ride to EV stocks. Last year, the gains came fast and furious for the rising stars of the industry, but have been more difficult to obtain so far this year. Nio (NIO) is a good example. The Chinese EV maker has accumulated 1,172% stake gains in 2020, but its 2021 acquisition has now turned negative.
The turn to red comes after Nio announced mixed earnings in the fourth quarter. The company generated revenues of US $ 1.02 billion, a year-on-year increase of 149.3% and almost in line with estimates. However, non-GAAP earnings per share of – $ 0.14 represented a greater loss than the 7 cents per share loss that analysts had expected.
For 1Q21, Nio expects to deliver between 20,000-20,500 vehicles, totaling an increase of more than 400% year on year and a sequential gain of 15-18%, driven by higher than expected sales in February – the company delivered 5,578 units in the last month, bringing the total from January to February to 12,803.
The company said it now has the capacity to produce 10,000 vehicles per month, but due to the global chip shortage and battery supply restrictions are currently limited to 7,500. However, until July, the company believes that these headwinds are expected to decrease, which will allow the company to meet its goal.
The market’s negative reaction to Nio’s quarterly statements is not shared by Edison Yu of Deutsche Bank. The analyst remains firmly in Nio’s corner and says there is “a very real path to> 100,000 deliveries in 2021E”. However, Yu held back those expectations, estimating that Nio could deliver 96,000 units this year. Still, the number is 6,000 more than its previous estimate.
Yu believes that there is a “growing awareness and appreciation of [the company’s] aspirational brand and ecosystem, putting NIO on the right track to be the market leader in China’s premium segment. “
Further down the line, Yu sees “several areas of untapped growth”.
A potential partnership to develop a different brand that caters to the midsize / mass market is a possibility, as well as the recurring sales of NAD software subscriptions – the NIO Autonomous Driving service.
Yu also thinks investors are underestimating the potential for “incremental volume in Europe”, where sales will start later this year.
“With ample capital coming out of 2020, we believe that the company can invest aggressively to expand its capacity / service network and improve its software / engineering capabilities in autonomous driving,” summarized Yu.
Thus, the analyst sees the stock’s recent weakness as a buying opportunity and reiterates a Buy rating and a target price of $ 70 for the shares. Investors can pocket gains of ~ 62% if Yu’s thesis is realized in the coming months. (To watch Yu’s story, Click here)
How does the rest of Rua see the year that is preparing for Nio? The stock has a moderate Purchase consensus rating, based on 7 purchases and 3 withholdings. The average target price is just below the Yu and, at $ 68.26, suggests gains of ~ 58% next year. (See Nio’s stock analysis at TipRanks)
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Disclaimer: The opinions expressed in this article are exclusively those of the analyst presented. The content should be used for informational purposes only. It is very important to do your own analysis before making any investment.