Electric cars are the future, aren' they?
Is $NIO (Nio Inc.) a buy? Recently Nio has been riding on the EV surge. With $TSLA (Tesla Motors, Inc.) smashing through levels like no tomorrow retail investors are looking for the 'next big one'. Will Nio be it?
Nio delivered 3,436 vehicles in May, up 215% versus the same period a year earlier. They have direct access to a country which continues to build new wealth and it's well known China are offering extensive benefits to EVM and EV buyers. Electric Vehicle Manufactures can earn up to $3500 per vehicle produced, the only downside is this won't apply to new electric vehicles over $42k. These subsidies will decrease 10% each year until the end of the program in 2022.
There is also increasing interest from funds in NIO with over 10million shares being purchased by funds in the last 6 months. These include the household names such as Blackrock inc (3%), Vanguard group inc ( 3.5%), Morgan Stanley (1.5%) and Goldman Sachs with just over 1%. Tencent Holdings also have significant investment in the company.
Nio's main market is obviously China, but if they can begin to ship overseas and present the world with a more affordable option to Tesla I think they could be on to a winning strategy. In the UK, far east car makers such as Kia and Hyundai have seen good growth with their more affordable options compared to the regular main street brands.
My only concern is the rate that they are burning through capital. If they can get a grip on expenditure it could see positive profits by 2023. Forecast turnover for 2020 is up 71% from Q4 2019, with an EPS increase of 38% (although still negative).
EV isn't going anywhere. It's the future and the car makers at the forefront of the movement will be the ones rewarded in the end. The difficulty is what EV producers will still be standing?
Consensus price between analysts is $5.50. But I'm the first to ignore analysts valuations as they have to be conservative. I don't currently hold a position in Nio but I will be keeping my eye on it. I don't think I'll be taking a punt just yet but it's certainly on my radar.