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NIO: Despite the chip shortage, deliveries could double this year, says the analyst
Chinese electric car company NIO (NIO) is set to report earnings in the first quarter of April 29, and Mizuho analyst Vijay Rakesh is optimistic – valuing the stock as a “buy” with a target price of $ 60. (To view Rakesh’s track record, click here) As the analyst recommends in his recent note, NIO increased its deliveries more than five times a year in March to about 20,100 vehicles as SUV production ES8 and EC6 rose – much faster than the 16% increase in global car industry production or 77% increase in unit sales in China, either way. NIO sales also exceeded their own published forecast of 19,500 deliveries. Despite well-publicized and industry-wide supply problems with semiconductors needed for car production, Rakesh believes the company’s sales will “remain strong until 2021E”, doubling by the end of the year, even if production slows somewhat in Q2. in the short term, the industry solves its problems in the semiconductor supply chain. Rakesh forecasts deliveries of 87,000 electric vehicles this year, 141,000 electric vehicles in 2022 and 223,000 in 2023. Helping NIO maintain this strong growth trend, the analyst says, is the company’s leading position in “battery replacement stations. from China ”, if the depleted batteries of an EV can be charged – or alternatively turned off for fully charged batteries in minutes. (Because NIO sells cars separately from batteries and offers them to the latter “as a service”, battery replacement is included in its price). Rakesh estimates that the NIO costs between $ 450,000 and $ 1.5 million to set up a battery replacement station and another $ 300,000 to store batteries in inventory, although both costs will fall in the future as “standardization” is implemented throughout. industry in accordance with government policy. Over the next four years, Rakesh finds that NIO will grow from about 500 stations it plans to have by the end of this year, setting up up to 5,000 such battery exchange stations in partnership with state-owned Chinese oil. and the gas giant Sinopec. The analyst also notes that NIO will allow owners of Ford Mustang-E electric cars to use their battery charging stations, thus increasing the NIO customer base and “helping NIO pay off battery costs faster.” What does all this mean for the NIO in terms of dollars and cents? Rakesh estimates the NIO will generate $ 5.2 billion in revenue and lose $ 0.29 per share this year, but will increase revenue by 85% to $ 9.6 billion in 2022 and make its first profit. that year ($ 0.14 per share). Despite the fact that the company became profitable in 2022, however, the analyst chooses to base its $ 60 price target not on earnings, but on an 8.8-fold estimate of estimated sales for 2022. (Perhaps because to say that NIO is worth “428 times the estimated earnings by 2022” would sound a little too rich.) In any case, by 2023, the analyst sees revenue growing another 73% to $ 16.6 billion and profits rising six times up to $ 0.88 per share. Assuming that NIO reaches these numbers, P / E based on earnings in 2023 would fall to a slightly nicer gain of 68x. Nio has strong support for the rest of the street. Except for the 3 Holds, all the other 6 analysts who published a review in the last 3 months recommend the stock as Buy. Consensus assessment Moderate buying is accompanied by a price target of USD 62.30, which implies an increase of 72% compared to current levels. (See analysis of NIO shares on TipRanks) To find good ideas for trading EV shares at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that brings together all the information about TipRanks shares. Disclaimer: The opinions expressed in this article are only those of the analyst presented. The content is intended for informational purposes only. It is very important to do your own analysis before making any investment.