Electric vehicles, last I checked, do not perch on bubbles very well. But market mavens who have watched the unstoppable rise of Chinese EV maker Nio (NYSE:NIO) may well wonder: Will 2021 deliver the pinprick to let the air out of those high-performance tires? For those holding NIO stock, the answer remains thus: Elon Musk, eat my dust.
Or, if you prefer to channel your inner Vin Diesel, what a fast and furious ride. Not that EVs take diesel, mind you, though NIO stock might as well run on nitro.
Year over year, it’s up more than 1200%. And just when investors were starting to get a bit rattled — NIO stock hit a share price pothole that dipped into an early December capital raise — Wall Street sent a love note right back just in time for Valentine’s Day.
Nomura analyst Martin Heung initiated his coverage of NIO stock on Jan. 22 with his “buy” rating and a price target of $80.30. That’s nearly a third above where Nio shares trade today.
As for the specifics, Heung singled out Nio’s “Tesla-like top-down approach” of launching luxury vehicles, then following up those with models that have more consumer-friendly price points.
Speaking of which, is NIO stock at a price point that merits a nice, hefty purchase? Allow me to kick the tires for ya.
NIO Stock and Analyst Attention
Heung’s entry into NIO stock coverage reinforces how Wall Street is taking notice. Whereas some EV companies have maybe one or two analysts on the case, Nio now has 18. That’s two more than three months ago. As for where they meet, the consensus leans strongly overweight. Ten call it a buy — one more than last month — with six a hold and two a sell.
As bullish as I remain on NIO stock, I see exactly where the six analysts in the non-buy camp come from. Nio remains unprofitable and much of its positive momentum in 2020 resulted from timely Chinese government assistance and the sale of 68 million new shares in December, which raised close to $3 billion.
The question thus remains whether Nio is ready to stand on its own legs, or wheels if you like. Here, it’s useful to look at what an EV company is already doing as opposed to what it says it will do.
While many sector hopefuls such as Lordstown Motors Corp. (NASDAQ:RIDE), Fisker Inc. (NYSE:FSR) and Workhorse Group (NASDAQ:WKHS) are still working towards getting vehicles in the hands of drivers, Nio is already there.
An Ev Maker That Actually Makes EVs
Nio is putting out automobiles. Those mulling a NIO stock purchase should strongly take this into account. After all, there’s a wide gulf between selling the dream and selling the real deal on wheels.
As of Dec. 1, Nio delivered 36,721 vehicles in 2020, an increase of 111% year over year. Compare that to Workhorse Group, which has a production target of 1,800 vehicles for 2021, or Fisker, which hopes to have its first Ocean SUVs on the market by 2022.
Nio’s sales figures impress me all the more when you consider that all the action is taking place in its home country. Too bad for American drivers, many of whom would jump at the chance to buy Nio’s luxury ES8 SUV.
On the practical side, it has a 360 mile range (better than my thrifty Toyota Corolla does on unleaded regular). And for those who love the bells and whistles, the ES8’s features run the gamut from an all-digital cockpit that updates itself to a customized fragrance system (which the company gleefully describes as “pure, joyful and elegant”).
Perhaps it’s dumb luck or smart circumstance, but Nio’s vehicles are ready to roll at just the time when the world needs them and consumers want them. Deloitte forecasts that EV sales worldwide will grow from an estimated 2.5 million in 2020 “to 11.2 million in 2025, then reaching 31.1 million by 2030.”
A Political Climate Change
This much I know as well: Unlike his predecessor, President Biden actually believes that climate change is real. On his first day in office, he signed an executive order getting the U.S. back into the Paris Accord. That international agreement presents the last, best chance for the world’s nations to halt the devastation wrought by climate change.
You can also bet the Biden administration will do much to spur enthusiasm and federal support for this mode of transport. That could in turn pave the way for Nio’s vehicles to hit the states.
The company already has offices in San Jose, so if they intended to stay in China forever, you could’ve fooled me. Last year, Nio CEO William Li indicated that he wants the company’s cars to go global by 2023-24.
If Nio’s vehicles roll up to dealer lots stateside and Americans fall in love with them as much as the Chinese have, then it’s game over in the best possible sense for those who own NIO stock. Maybe, just maybe, there will be enough profit left over to put an ES8 in my driveway. Now that would be pure, joyful and elegant.
On the date of publication, Lou Carlozo held a long position in NIO.