2021 is proving less of a free ride for EV stocks. Last year, the gains came fast and furious for the stars of the rising industry, but they have been harder to come by so far this year. Nio (NIO) is a good example. The Chinese EV maker accumulated share gains of 1172% in 2020, but its 2021 haul has now turned negative.
The swing into the red comes after Nio reported mixed Q4 earnings. The company generated revenue of $1.02 billion, a year-over-year increase of 149.3% and roughly in-line with the estimates. However, Non-GAAP EPS of -$0.14 amounted to a bigger loss than the loss of 7 cents per share the analysts were expecting.
For 1Q21, Nio anticipates delivering between 20,000-20,500 vehicles, amounting to more than a 400% year-over-year uptick and a sequential 15-18% gain, boosted by better-than-expected sales in February – the company delivered 5,578 units last month, bringing the Jan-Feb total to 12,803.
The company has said it now has the capacity to produce 10,000 vehicles a month, but due to the global shortage of chips and battery supply constraints is currently limited to 7,500. However, by July the company believes these headwinds should subside, which will enable the company to meet its target.
The market’s negative reaction to Nio’s quarterly statement is not shared by Deutsche Bank’s Edison Yu. The analyst remains firmly in Nio’s corner and says there is a “very real path to >100k deliveries in 2021E.” However, Yu keeps a lid on such expectations by estimating Nio can deliver 96,000 units this year. Still, the figure is 6,000 more than his prior estimate.
Yu believes there is a “growing awareness and appreciation of [the company’s] aspirational brand and ecosystem, putting NIO on track to be a market leader in the China premium segment.”
Further down the line, Yu sees “several areas of untapped growth.”
A potential partnership to develop a different brand catering to the mid-tier/mass-market is a possibility and so is recurring software subscription sales from NAD – the NIO Autonomous Driving service.
Yu also thinks investors are underestimating the potential from “incremental volume in Europe,” where sales will kick off later this year.
“With ample capital exiting 2020, we believe the company can invest aggressively to expand its capacity/service network and improve its autonomous driving software/engineering capabilities,” Yu summed up.
Accordingly, the analyst sees the stock’s recent weakness as a buying opportunity and reiterates a Buy rating and $70 price target for the shares. Investors could be pocketing gains of ~62%, should Yu’s thesis play out over the coming months. (To watch Yu’s track record, click here)
How does the rest of the Street see the year shaping up for Nio? The stock has a Moderate Buy consensus rating, based on 7 Buys and 3 Holds. The average price target is just below Yu’s and, at $68.26, suggests gains of ~58% in the year ahead. (See Nio stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.