Chinese electric vehicle (EV)maker Nio (NYSE:NIO) was one of the biggest winners in the stock market last year. Nio stock gained more than 1600% in the past year relative to the S&P 500.
After an almost 50% increase in its price this past month, Nio is showing no signs of slowing down. With another strong quarter and several innovative developments in the pipeline, expect Nio to continue its impressive run this year as well.
One concern for China’s EV companies is the threat of Tesla’s (NASDAQ:TSLA) popularity in the region. Tesla released its first China-made Model Y car in the first week of January and is expected to slash its prices once production rises. Whether local governments allow this headwind to develop remains to be seen.
For now, Nio stock is a solid bet for the future.
Stellar Earnings and Financial Position
Nio has had an incredible past few quarters. Its revenues have grown by triple digits, and the company is getting ever-so-close to breaking even. It appears as if its fourth-quarter will be no different.
In Q4 Nio delivered 17,353 vehicles, which represents a 111% increase on a year-over-year basis. It set a new monthly record with 7,007 deliveries in December, representing a 121% year-over-year growth. The phenomenal December performance helped it beat its internal guidance by 2% for the fourth quarter.
With 43,728 deliveries for the year, Nio has delivered roughly 40% of its vehicles this quarter. Its revenues may surpass guidance at around $1 billion, representing a 130% to 140% year-over-year increase. Fiscal revenues will rise to nearly $2.75 billion, easily beating consensus estimates at $2.4 billion.
As Nio gets closer and closer to turning a profit, margin expansion will be imperative. Stronger growth in deliveries should help offset heavy operational expenses and get it closer to its margin targets. At this rate, it appears as if Nio could turn a profit within the next couple of years.
Additionally, Nio has done an excellent job in solidifying its financial position. The company currently has $3.3 billion in cash, buffed up by its recent 68 million shares offering $39 per ADS. It will be using the proceeds from the share offering for R&D and general purposes.
The Potential of the ET7
Nio recently showed off its new ET7 electric luxury sedan, which is expected to be the company’s first autonomous vehicle. It comes with a sleek design and a range of over 620 miles with a solid-state battery option down the road. It will have a starting price of $69,100 and a lower price of roughly $58,300 if the customer opts for the company’s battery-subscription program.
The company states that the vehicle comes with 33 hardware sensors, including a lidar sensor, supporting the autonomous operation. Moreover, the car can get up to 0-100 kilometers per hour in just 3.9 seconds.
Nio also showcased its latest 150 kilowatt-hours (kWh) battery pack and on-board computing systems, a part of the ET7. The car is said to have autonomous capabilities and a solid-state battery option.
It’s difficult to say how the ET7 will be fair at this point, but Citi (NYSE:C) believes that it will have it tough against the competition. It expects that the ET7 will face a stiff challenge from Tesla’s Model Y and S. The bank believes that the car will add roughly 3,000 to 4,000 units a month from the first quarter of 2022.
Final Word on Nio Stock
Nio stock couldn’t have had a better 2020, and it’s off to a similar start this year. It has several developments in the pipeline, including its luxury ET7, which should ensure a healthy increase in deliveries for the foreseeable future.
Nio’s balance sheet is pristine, and its strong earnings performance continues to beef up its cash balance. Even though Tesla’s foray into the Chinese market could potentially be a cause for concern in the long term, and the stock is pricey, I feel it’s well worth investing in at this point.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article
