Nio (NYSE:NIO) stock rose 5% in pre-market trading this morning on the positive results from Tesla (NASDAQ:TSLA).
TSLA stock jumped over 9% overnight as the company’s earnings and revenue beat street estimates.
Mizuho analyst Vijay Rakesh also called Nio “attractively valued” compared with Tesla, seeing electric vehicle sales rising 22% per year.
Nio’s market capitalization on Jan. 26 was about $20 billion, down 67% over the last year. Tesla is down 53% over the last year but is still worth nearly $500 billion.
Why Nio Now?
Rakesh sees Nio as the best-positioned of the three luxury Chinese makers trading in the U.S., thanks to its battery-swapping technology that can improve a car’s driving range in just a half hour. The other two Chinese luxury nameplates trading in the U.S. are Li Auto (NASDAQ:LI) and Xpeng (NYSE:XPEV).
China dominates the electric vehicle market and represents almost two-thirds of the industry’s sales. Rakesh adds that Nio will deliver two new models this year, and last year’s new models are “ramping well.”
Nio delivered over 40,000 cars in the fourth quarter, and over 122,000 for all of 2022. Tesla delivered over 400,000 vehicles in the fourth quarter. Tesla delivered 1.31 million cars for the full year and expects to deliver 1.8 million in 2023.
Still, the law of large numbers means Nio is growing faster than Tesla. The end of China’s Covid lockdowns could also increase sales. Nio is now exporting to Europe with plans to enter the U.S. market in 2025. Some analysts think Nio could grow 50% in 2023. Unlike Tesla, however, Nio was not profitable in 2022, although gross margins in the third quarter were nearly 25%.
NIO Stock: What Happens Next?
Tipranks calls Nio a “moderate buy,” with 11 of 15 analysts telling investors to buy the ADR. Tesla is also called a moderate buy, but three of its 28 analysts are telling investors to sell it.
As with all Chinese stocks, the fate of Nio is tied to China’s government, which lately has been allowing for growth while tightening state control. Nio benefits from that, having gotten $1.4 billion in new investment from the municipal government of Hefei and a production contract with state-controlled JAC Motors.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.