In case anyone was under the impression electric-powered car stocks would pause for a breather following 2020’s blistering rise, they forgot to hand Nio (NIO) the memo. The Chinese EV maker has seamlessly advanced into 2021, with shares now up by 31 % after the turn of year.
The company has long been a key beneficiary of the current trend for both EV makers and growth stocks. Following the recent annual Nio Day event, J.P. Morgan analyst Nick Lai matters 4 strategic milestones, why he feels Nio is going to continue to exchange more like a fast growth technology/EV inventory than a carmaker.
These include the pivot at a distance from the existing products’ Mobileye EQ4 solution to an in house autonomous driving (AD) answer based on Nvidia architecture. A solid-state battery for the next new model – an ET7 sedan – boasting 150kwh capacity or range of over 1,000km, as well as the commercialization of LiDar to deliver super-sensing capability on ET7.
Most fascinating of all the, however, would be the first of articles monetization? e.g. Ad as a service.
Lai feels this opens up a whole brand new world of monetization options for automobile makers and also suggests succeeding automobiles will be like smartphones with wheels.
For Nio’s next design, the ET7 sedan, owners are going to be ready to access a total AD service for Rmb680 a month.
Assuming 5 7 yrs of use, Lai says, Cumulative payment will be similar or higher compared to the one time AD choice payment at Tesla or Xpeng.
Down the road, Lai expects Nio will ramp up content monetization revenue in various goods and services.
The analyst’s awareness evaluation indicates some content revenue could possibly increase rapidly from 2022, implying accretion of equity present value of ~US$21-35/shr.
Appropriately, Lai reiterates a heavy (i.e. Buy) rating on NIO shares and bumped the purchase price target up from $50 to a block high of $75. Investors could be pocketing gains of 18 %, should Lai’s thesis play through with the coming months. (to be able to watch Lai’s track record, click here)
Nio has good support amongst Lai’s colleagues, but its present valuation presents a conundrum. NIO’s Moderate Buy consensus rating is based on eight Buys and 4 Holds. However, the share gains keep coming in dense and fast, and also the $52.28 average price target now indicates shares will drop by ~19 % with the next 12 months.
