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NIO: Despite the shortage of chips, deliveries could double this year, says analyst
The Chinese electric car company NIO (NIO) will report its earnings in the first quarter on April 29, and Mizuho analyst Vijay Rakesh is optimistic: he views the stock as a ‘buy’ with a price target of $ 60. (Click here to see Rakesh’s performance history.) As the analyst recommended in his recent note, NIO increased its delivery more than fivefold on an annual basis to approximately 20,100 vehicles in March, as production of its ES8 and EC6 SUVs have shot up – much faster than the global automotive industry’s production growth of 16%, or the 77% increase in China’s unit sales, one of the two. And NIO’s sales exceed its own published forecast of 19,500 deliveries. Despite well-publicized and industry-wide supply problems with semiconductors needed for motor production, Rakesh believes the company’s sales are likely to “remain strong until 2021E”, which will roughly double by the end of the year, even if production in the short term of the second quarter declines somewhat, the industry is working out the kinks in its semiconductor supply chain. Rakesh predicts deliveries of 87,000 EVs this year, 141,000 EVs in 2022 and 223,000 in 2023. To help NIO maintain this strong growth trend, the analyst says, the company’s leading position is in ‘battery exchange stations in China’, where batteries from ‘ an EV is exhausted. can be charged – or alternatively switched off within a few minutes for fully charged batteries. (Since NIO cars are sold separately from the batteries, and the latter render ‘as a service’, battery swap transactions are included in the latter’s price). Rakesh estimates that it costs NIO between $ 450,000 and $ 1.5 million to set up a battery exchange station, and another $ 300,000 to stock it with batteries in stock, though both of these costs will decrease in the future as “standardization” “implemented across the industry in line with government policies. Over the next four years, Rakesh notes that by the end of this year, NIO will grow from the approximately 500 stations it plans to eventually swap as many as 5,000 such batteries in collaboration with state-owned Chinese oil and gas giant Sinopec. The analyst further notes that NIO will allow owners of Ford Mustang-E electric cars to use their battery charging stations, which will increase NIO’s customer base and ‘help NIO amortize the cost of the battery stations faster.’ What does all this mean for NIO in terms of dollars and cents? Rakesh estimates that NIO will earn $ 5.2 billion in revenue this year and lose $ 0.29 per share, but will increase revenue by 85% to $ 9.6 billion in 2022, making its first profit that year ( $ 0.14 per share). Although the company became profitable in 2022, however, the analyst chooses not to base its $ 60 price target on earnings, but on a valuation of 8.8 times the estimated sales in 2022. (Perhaps the analyst in 2023 ‘ an increase of 73% and says that the NIO is worth ‘428 times the estimated revenue’.) In 2023, the analyst will see in any case that revenue increases another 73% and reaches $ 16.6 billion, and the profit sixfold grows to $ 0.88 per share. Assuming that NIO achieves the numbers, the profit / earnings based on 2023 earnings will drop to a slightly more tasty 68x earnings. Nio has strong support from the rest of the street. Barring 3 Holds, all 6 other analysts who have published a review over the past three months, recommend the stock as a buy. The consensus rating of the moderate buy is accompanied by a price target of $ 62.30, which implies an upward point of 72% from the 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 newly introduced tool that unites all TipRanks stocks. Disclaimer: The opinions expressed in this article are solely those of the proposed analyst. The content is for informational purposes only. It is very important to do your own analysis before making any investment.