Nio (NYSE:NIO) will release its first quarter sales and earnings on Thursday, April 29, after having pre-released on April 1 the delivery numbers for the quarter. As a result, Nio stock could move higher, especially if the company updates its outlook for the rest of the year. My assessment is that Nio is worth $73.34, or 72% higher than this morning’s price of $42.58. This is close to my previous target of 72.04, as discussed in my previous article.
Nio stock has moved up 6.5% since April 1 when it closed at $39.66. But it is still down about 33% from its peak of $62.84 on Feb. 9. I suspect that if the company provides a positive outlook for the rest of the year, NIO stock will move closer to my price target.
Q1 Earnings and Outlook
Nio produced great delivery results in Q1. The Chinese electric vehicle (EV) maker delivered 20.060 EVs during the quarter ending March 31, up 423% year-over-year. In fact, this was also 15.6% higher than the 17,353 electric cars delivered last quarter in Q4.
During March the company delivered 7,257 EVs, which was up 30% year-over-year. This effectively was a turnaround from the 22.8% drop in EV deliveries during February. The higher March deliveries also effectively turned the corner for the Q1 quarter, bringing deliveries to record levels.
My estimate is that revenue rose by 16.2% to $1.182 billion in Q1. We will find out on April 29. As a result, I have increased my revenue forecast to $6.867 billion, up from $5.806. This represents a total year-over-year forecast revenue gain of 195% over 2020.
Moreover, assuming 2022 sales rise by 75% (which could end up being way too low), the 2022 sales could be $12.017 billion. Therefore, using a 10 times revenue multiple, NIO stock would be worth $120.166 billion. This is 72% higher than today’s market value of $69.77 billion.
Click to Enlarge
Assuming there are 1.638 billion ADRs outstanding, my price target rises to $73.34 per share, or 72% higher than today.
You can see the quarterly EV deliveries in the table on the right, including my forecasts for the rest of 2021.
Click to Enlarge
In addition, you can see in the table on the right how I derived my NIO stock target market value and price. This uses a price-to-sales multiple of 12.67 times for 2021 and 10x for 2022.
Therefore, even if it takes a year and a half for the $73.34 price target to come about, it still represents a compound average annual return of 43.67% for the year and a half period.
What To Do With Nio Stock
I’m not the only one who thinks Nio stock is undervalued. For example, Seeking Alpha reports that 19 analysts on Wall Street have an average price target of $62.45 — that’s about 47% higher.
Moreover, other analyst survey sites tend to agree with these higher price targets. TipRanks indicates that 10 analysts who have written on NIO stock in the last three months have an average target of $60.84. This represents a potential gain of 42% over today’s price. Marketbeat says that the consensus target price from 18 analysts over the last 12 months is $49.94, or 17% higher.
My target price is $73.34, which is slightly higher than the Wall Street target prices. But my model is much simpler and not as complex as the other analysts’ models. So you might want to take my prediction with a grain of salt in that regard.
Nevertheless, it seems that NIO stock has fallen too far from its peak. When the company produces its earnings for Q1 on April 29, it could potentially also provide guidance for 2021. Look for NIO stock to rise substantially closer to my target price if that occurs. That could also depend on whether the outlook is for higher deliveries for the rest of 2021.
On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
