Tip Ranks
NIO: Despite the chip shortage, deliveries could double this year, analyst says
Chinese electric car company NIO (NIO) will publish its first-quarter earnings on April 29, and Mizuho analyst Vijay Rakesh is optimistic – judging the stock a “buy” with a $ 60 price target. To view Rakesh’s track record, click here) As the analyst advises in his recent note, NIO more than quintupled its deliveries year-on-year in March to approximately 20,100 vehicles as production of its ES8 and EC6 SUVs increased. – much faster than the global auto industry’s production growth of 16%, or the 77% increase in unit sales in China, either. And NIO’s sales exceeded its own published forecast of 19,500 deliveries. Despite well-publicized and industry-wide semiconductor supply issues needed for automotive manufacturing, Rakesh believes the company’s sales are likely to “ remain strong through 2021E, ” roughly doubling through the end of the year, even if production slows somewhat in the industry’s second quarter resolves kinks in its semiconductor supply chain. Rakesh forecasts deliveries of 87,000 electric vehicles this year, 141,000 electric vehicles in 2022 and 223,000 in 2023. Helping NIO sustain this strong growth trend, the analyst says, is the company’s leading position in ‘battery exchange stations in China’ , where the batteries of an electric car are empty. can be charged – or alternatively turned off in minutes for fully charged batteries. (Because NIO sells cars separately from the batteries, and offers the latter “as a service”, battery changes are included in the price). Rakesh estimates it will cost NIO between $ 450,000 and $ 1.5 million to set up a battery swap station, and another $ 300,000 to keep it stocked with batteries, although both of these costs will decrease in the future because ” standardization ‘is implemented throughout the industry in accordance with government policy. Over the next four years, Rakesh notes that NIO will grow from the roughly 500 stations it aims to have by the end of this year, eventually setting up as many as 5,000 such battery swap stations in partnership with China’s state oil. and gas giant Sinopec. The analyst further notes that NIO will allow owners of Ford Mustang-E electric vehicles to take advantage of its battery charging stations, growing NIO’s customer base and “helping NIO write off the cost of the battery station faster.” What does all this mean for NIO in terms of dollars and cents? Rakesh estimates that NIO will generate $ 5.2 billion in revenues this year and lose $ 0.29 per share, but revenues will grow 85% to $ 9.6 billion by 2022, making its first profit that year ($ 0.14 per share). Despite the company becoming profitable in 2022, the analyst chooses to base its $ 60 price target not on earnings, but on a valuation of 8.8 times its estimated revenue for 2022. (Perhaps because say NIO ‘428 times the estimated profit of 2022 ‘sounds a bit too rich.) In any case, by 2023, the analyst sees revenues increase by another 73% to $ 16.6 billion, and earnings increase sixfold to $ 0.88 per share. . Assuming NIO hits those numbers, the P / E based on 2023 earnings would drop to a slightly tastier 68x earnings. Nio has strong support from the rest of the street. With the exception of 3 Holds, all 6 other analysts who published a review in the past 3 months are recommending the stock as Buy. Moderate Buy’s consensus rating is accompanied by a price target of $ 62.30, which is a 72% increase from current levels. (See NIO Stock Analysis on TipRanks) To find great ideas for EV stocks trading at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ insights on stocks. Disclaimer: The opinions expressed in this article are solely those of the Recommended Analyst. The content is provided for informational purposes only. It is very important to conduct your own analysis before making an investment.