Nio (NYSE:NIO) has been on a tear in the past month. In fact, NIO stock is up 69% over that span and more than 1,000% the past six months. This is incredible, but whether this continues depends on how well the company performs and its outlook.
Nio, a Chinese company that does not have to follow SEC quarterly reporting rules, will report its earnings on Nov. 17. However, the company recently provided an update on its October delivery performance.
Nio reported on Nov. 2 that it delivered 5,055 electric vehicles (EVs), which was up 100.1% over the amount last year. And year-to-date, it has delivered 31,430 EVs — up 111.4%.
Additionally, Nio reported on Oct. 2 that its September deliveries rose by 133.2% over last year with 4,708 EVs. Moreover, its third-quarter deliveries rose by 154.3% over last year with 12,206 deliveries.
This also represents significant monthly progress. For example, in August it delivered 3,965 EVs, and in July there were 3,533 deliveries. So, the October deliveries were up 7.4% over September, and up 27.5% over August.
So, think about that. In two months, its monthly deliveries are up by 27.5%. Therefore, let’s assume its average monthly increase is 13.75%. At this pace, Nio could deliver 5,750 in November, and 6,540 in December.
That results in 17,345 estimated deliveries in Q4, or 42.1% more than the 12,206 in Q3, and 67.9% more than the 10,331 delivered in Q1. In turn, we can use this to estimate some numbers for NIO stock’s value.
What This Means For Nio
Let’s try to put some dollar numbers on these forecasts. I will try to make this fairly simple so that we can estimate what NIO stock is worth.
Now, we know two things from the Q2 earnings report. First, Nio delivered 10,331 electric vehicles. Second, they had revenue of $493.4 million (Nio provided the conversion into dollars).
Therefore, we can calculate the average selling price (ASP) of the Q2 EVs. If we divide $493.4 by 10,331 vehicles, the ASP is $47,759.
Using this information, and assuming that ASPs increase by 1% per quarter, I estimate that the company will produce 43,720 EVs in 2020 with a total revenue of $2.1 billion
However, my forecast for 2021 shows that revenue is set to explode. I increased slightly the monthly average delivery growth to 15% per month. This works out to 52% growth quarter-over-quarter. In addition, I kept the 1% quarterly ASP increase.
The chart below shows my forecasts. It shows that by the end of 2021, Nio will have delivered 218,115 EVs. In addition, revenue will be $10.95 billion, or almost $11 billion.
You can also see in the table on the right how I came up with this chart.
For example, it shows how the average selling price (ASP) results in the quarterly revenue numbers.
The quarterly numbers are based on monthly forecasts of approximately 15% gains each month during 2021.
That said, you can see that the average quarterly growth in revenue is well over 53% each quarter during 2021. That is what is propelling the value in NIO stock.
What This Means For NIO Stock
Keep in mind that Nio will deliver less than half of the deliveries that Tesla (NASDAQ:TSLA) is set to deliver this year. In fact, Tesla’s revenue is forecast to be $30.87 billion in 2020 and its present market value is $400 billion.
This implies that NIO stock is worth a good deal more than its present price if these forecasts come about. For example, right now, at $48.5 billion, Nio’s market capitalization is more than 10% of Tesla’s.
However, by the end of 2021, it is forecast to produce about 44% of cars that Tesla will produce this year. Its revenue could be $11 billion, or 35.8% of Tesla’s revenue.
As a result, it is likely that the market might push NIO stock up to 35.8% or more of Tesla’s present market value. That works out to $131.74 billion.
Therefore, assuming no more capital raises, and not taking into account profitability differences, NIO stock will be worth 3.17 times more (i.e., $131.7 billion divided by $41.6 billion). This implies a price for NIO stock of $105.52 per share (i.e., 3.167 times its price today, Nov. 2, of $33.32 per share).
Overall, hang on to your hat. If Nio continues in this growth trajectory, we can expect NIO stock will continue to move up quite dramatically.
On the date of publication, Mark R. Hake had a long position in Tesla stock.