In the funhouse mirror world that is Wall Street, conflicting sets of numbers too often co-exist, rendering a product that reeks of alternate universe math. Such is the case with Nio (NYSE:NIO) stock: a portfolio rocket launcher disguised as a Chinese electric vehicle maker.
Forget the crystal ball, Madam Marie, because in this case you’ll need a crystal two-sided coin to make heads or tails of his one. Three months ago, six analysts called Nio stock a buy and six a hold. Now, nine call it a buy compared to just two hold ratings, making it decidedly overweight.
Yet forecasts for the last quarter of 2020 project that Nio stock will more than triple its losses to 8.5 cents per share, and lose even more in the first quarter of 2021 (12 cents per share). Imagine that: a car maker that rolls in reverse and drive at the same time.
So, will investors grind their gears? Or is this what happens when something extra special is about to roll off the assembly line?
Nio Stock By the Baffling Numbers
Right now, Nio stock trades at $49.25 per share, and since June 1 the run-up has been remarkable and unstoppable. It has multiplied by more than 10x in share price and year over year, more than 26x. Up, up and away! But are Nio bulls getting carried away?
The more numbers you look at, the more confusing it gets. For starters, if it’s profits you seek, go raid Junior’s piggy bank because you’ll find more in there than in Nio’s coffers. No profits? No problem! That’s how every EV company rolls these days, right? (Lou shakes his head. Ugh.)
And given how many analysts love Nio stock, it’s a real head-scratcher that they had set an average consensus price target of $39, well below what the stock trades for today.
That was, until just days ago.
Higher Targets to Hit
On Nov. 18, analysts for Bank of America (NYSE:BAC) roughly doubled their Nio price target from $23 to a Street high of $54.70. That same day, two other analyst firms hiked their targets as well to $50. What gives? Higher sales than expected with fewer supply chain constraints. Compare that with EV maker Workhorse Group (NASDAQ:WKHS), which has struggled of late due to troubles with its main battery supplier.
Granted, $50 is barely above the current share price. But considering the major upward revisions taking place, it stands to reason that investors will fuel (or if you prefer, apply battery power to) the ongoing rally.
Normally, that sort of follow-the-lemmings mentality makes me nauseous. But lucky for the lemmings, Nio stock may prove to be the EV holding that not only defies expectations but also outflanks the uncertainty of America’s economy heading into 2021. For you see, Nio hasn’t sold a single car in our humble nation and really doesn’t have to.
Let’s Roll With This
Keep in mind that this Shanghai-based company’s sales prospects will play out in entirely in China, a nation where political leaders very much want it to succeed as a point of national pride. And the same factors that might cripple a U.S.-based EV maker due to the ongoing trade war simply don’t apply here.
Speaking of trade war, it’s a good bet that the incoming Biden administration will thaw things out. That would be great news for any Chinese company hoping to do business in the U.S. Nio stock could get a big boost if it starts selling vehicles in America and the company has hinted as much.
All bets could be off for America’s fledgling EV manufacturers if the novel coronavirus pandemic maintains its steely grip on the sector’s financial fortunes. As for Nio, its sales in China as of Oct. 1, hit 26,375, up 114% year-over-year; the company also set a monthly sales record in September.
Those numbers are worth savoring and I think prove worthy of your investment buck. I’ve seen long-range estimates for Nio stock as high as $300 per share by 2025. Hope or hype? No matter. I don’t think you’ll have to wait that long to take your victory lap.
On the date of publication, Lou Carlozo held long positions in NIO and BAC. He did not have (either directly or indirectly) any positions in other securities mentioned in this article.