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A price of $ 80 will lead Nio to become the third largest carmaker
As I prepare my latest article on Nio (NYSE: NIO), the hard-core Chinese manufacturer of electric vehicles (EVs), Nio shares are trading at $ 60. It values the company at $ 93.6 billion, which is good for the fifth place among the world’s largest automakers by market capitalization. Source: Sundry Photography / Shutterstock.com On February 1, Deutsche Bank analyst Edison Yu reiterates his $ 70 “buy” rating and price target. By reaching Yu’s target, Nio could become the third largest automaker in the world. This is why Volkswagen (OTCMKTS: VWAGY) and BYD (OTCMKTS: BYDDF) should look in their rearview mirrors. InvestorPlace – stock market news, advice and trading tips A lot has changed for Nio Stock over the past year About 15 months ago I did not have much to say about the emerging EV manufacturer: ‘As Taulli [InvestorPlace contributor Tom Taulli] points out that the company’s cash will burn at such a rate, that any future equity or debt financing arrangements will be highly one-sided for the entity that provides the lifeline and is terrible for current shareholders. “Nio’s Altman Z-Score, a predictor of future bankruptcy, is currently -4.45. This is nowhere near where it should be to give investors a warm, vague feeling. ‘I wish I had better news for Nio Shareholders. But you can not put lipstick on a pig. ‘Of course, in retrospect, we know that Nio reached $ 1 billion in critical funding less than five months later, and the rest is history. Forever it will be the turning point for the company. By June 2020, therefore, I had completely switched from skeptic to enthusiast, indicating that a double-digit share price was quite realistic by the end of the year. It ends in 2020, just shy of $ 50. It’s amazing what a billion dollars will do for your confidence. A 17% profit yields Nio on or near third place Based on the analyst’s twelve-month target price of $ 70, the Nio share only needs to rise by 17% in the next year to reach the target. With the rate at which it grows, it looks like a slam dunk. Nio recently announced further collaboration with the Hefei municipal government, the same people who saved the company from the crash in April 2020. As part of this collaboration, the Hefei government plans to reinvest the proceeds from their equity investment in Nio to further support EV production. the city. Hefei focuses on making the city a hotspot for all EVs. As part of this expansion, the city will build the Hefei Xinqiao Smart Electric Vehicle Industrial Park. It is important that Nio intends to use this park as the foundation for the growth of its global growth. Yu said: ‘This is the basis for expanding the capacity to help NIO reach its + 300k volume target in the longer term or almost 3x current capacity. Details have not been provided on funding sources, but we suspect there will be huge support in the form of bank credit lines or similar arrangements. A bit of success and the moneylenders fall over themselves to tackle the action. What’s the old saying? A banker will always give an umbrella when the sun is shining and there is no cloud in the sky. Either way, a share price of $ 70 puts Nio’s market capitalization at $ 109 billion, about the same value as BYD’s current market capitalization. However, I think it’s fair to say that if Nio moves higher in the next 12 months, so should BYD and Volkswagen, which are not too far behind at $ 107 billion. It has to go to $ 80 or higher to get third place, based on 1.56 billion outstanding shares, a share price of $ 80 by next year is its market capitalization at $ 125 billion, which gives him some breathing space over his two peers. Can it get there? I think it could rise 34% over the next 12 months to get to the magic number. Here’s how. In 2020, Nio delivered 43,728 vehicles. Based on the current market value of $ 93.6 billion, this is $ 2.14 million per vehicle delivered. In 2019, it delivered 20,565 vehicles. As of December 31, 2019, it has 831.9 million shares outstanding and a share price of $ 3.72. That’s $ 150,482 per delivered vehicle. I’m going to assume that Nio will double its delivery again in 2021. So, based on $ 93.6 billion, that’s $ 1.07 million for each of the 87,456 estimated vehicle deliveries in 2021. However, Nio may have a fourth vehicle, the EE7 sedan, in production by the fourth quarter, which definitely increases the numbers. It also has a fifth vehicle on the drawing board for 2022. Based on $ 1.07 million per delivery vehicle, it will have to deliver 116,822 vehicles by 2021. Although it is possible, I think it pushes it. Suppose a vehicle delivery number is approximately halfway between 87,456 and 113,636 and $ 1.65 million per vehicle delivered [halfway between $1.1 million and $2.2 million] and we get 100 546 vehicles delivered at $ 1.65 million for a market capitalization of $ 166 billion or $ 106.40 per share [1.56 billion outstanding]. I can not believe I’m saying this, but I think it has an excellent chance of blowing through Yu’s target on its way to third place in the global pick order. Long-term, Nio is a buy. At the date of publication, Will Ashworth had no (direct or indirect) positions in the securities mentioned in this article. Will Ashworth has been writing full-time on investing since 2008. Publications where he has appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and several others in both the US and Canada. He especially likes to create model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing, Will Ashworth holds no position in any of the above securities. More from InvestorPlace Why everyone invests in 5G. ALL WRONG Top Stock Voters Reveal His Next Potential Winner. It does not matter if you are saving $ 500 or $ 5 million. Do it now. # 1 Playing to Take Advantage of Biden’s Presidency The report A $ 80 prize would Nio use to become the third largest carmaker will first appear on InvestorPlace.