Nio Stock Forecast : An Analysis Of Nio Inc.
Nio Stock Forecast : An Analysis of Nio Inc.
Nio Stock Forecast : Nio is a Shanghai-based electric vehicle company founded in 2014 by Bin Li.
The company has gone through a lot of challenges since its inception, including almost nearing bankruptcy in 2019.
But Nio has reversed course and grown as a company thanks to an influx of cash from external sources as well as stock offerings. With hype surrounding the electric vehicle space and Nio’s growing demand, I, Jay Devon, believe that Nio is a buy!
They currently deliver three vehicles to customers in China only: the EC6, ES6, and ES8. The EC6 costs between $54,000 – $77,000, the ES6 costs between $54,000 – $83,000 and the ES8 costs between $67,000 – $90,000.
Nio also has the EP9, a luxury two-seat electric sports car; however it is not readily available to the public. Only 16 units of the EP9 have been sold and six of them were sold to early investors of Nio for $1.25 million each.
Nio made another ten EP9 vehicles due to popular demand and priced each of those at $1.48 million apiece. Four more electric vehicles are also planned to be delivered in the future. The ET7 was revealed this past January and will start delivering in 2022. The other three vehicles; EF9, ES3, and ET5 are set to debut later this year or in 2022 and will deliver shortly thereafter.
Nio went public in the U.S. in 2018 through a $1.8 billion initial public offering (IPO), even though Nio only sells vehicles in China. The stock had a rough start trading in its first two years cratering 80% from its IPO price of $6.26 to an all-time low of $1.19 on October 2, 2019, as a result of low cash and low sales that did not justify such a lofty valuation at the time.
However, in 2020, the stock surged over 1100%, as a result of an increase in sales and company growth. Nio continued to rally into the start of 2021, peaking at $66.99/share.
Additionally, many of their electric vehicle counterparts surged due to investor hype around the electric vehicle space. It has since pulled back 42% from its all-time high, currently trading at $38.70 as of April 8th’s close. This pullback occurred as a result of the global chip shortage and rising treasury yields that have pressured growth stocks.
Deliveries
First, let’s discuss vehicle deliveries since their IPO. In 2018, Nio delivered 11,348 vehicles with 3,318 of them delivered in December. Note that in 2018, the only vehicle sold at the time was the ES8, a full-size electric SUV that seats up to six people.
In 2019, the ES6 vehicle made its debut. The ES6 is a mid-size electric SUV that seats up to five people.
Nio delivered 9,132 ES8 vehicles and 11,433 ES6 vehicles for a total of 20,565 vehicles. In 2020, Nio unveiled the EC6, another mid-size electric SUV that seats up to five people. Although the ES6 and EC6 have the same specs, a major difference between the two is the maximum battery capacity.
Nio Stock Forecast : An Analysis of Nio Inc.
For the ES6, the biggest battery available is 84 kWh, giving the ES6 a maximum range of 317 miles, whereas, for the EC6, the biggest battery is a 100 kWh liquid-cooled battery pack offering a maximum of 382 miles of range. Nio delivered 27,945 ES6 vehicles, 10,861 ES8 vehicles, and 4,922 EC6 vehicles for a total of 43,728 vehicles.
For 2021 so far, as of March 31, Nio has delivered 8,088 ES6 vehicles, 4,516 ES8 vehicles, and 7,456 EC6 vehicles for a total of 20,060 vehicles. Additionally, this past January, Nio announced the ET7, Nio’s first electric sedan, will start deliveries in 2022.
Financials
Now let’s discuss Nio’s revenue and gross profits. In 2018, the year of the U.S. IPO, Nio’s annual revenue was $0.72 billion and profit was -$0.037 billion. In 2019, their annual revenue was $1.124 billion and profit was -$0.172 billion. But in 2020, their annual revenue was $2.492 billion and profit was $0.287 billion. As we see from the numbers, revenue keeps growing at a faster rate with 2020 revenue more than double 2019’s.
Last April, the company received a $1 billion bailout from various Chinese-owned entities, a turning point for the company since Nio was on the brink of collapse. By the end of 2020, Nio reported having $6.5 billion in cash on hand. In 2020, vehicle margin, or the difference between vehicle sales and cost of vehicle sales divided by vehicle sales, was 12.7%, compared to -9.9% in 2019.
This happened as a result of increased delivery volume coupled with lower production costs. Nio’s annual earnings per share (EPS) for 2020 was -$0.73, a much smaller loss than in prior years. Gross margin for 2020 was 11.5%, compared to -15.3% in 2019.
The most important thing to take away from these numbers is the fact Nio was able to turn a profit in 2020 amid a global pandemic. Vehicle sales contributed to the majority of Nio’s revenue with $2.3268 billion and other sales such as home chargers, warranties and other accessories contributed to the other $164.8 million.
The cost of sales was $2.204 billion, a 59% increase from 2019, however the increase was attributed to increased delivery volume. In terms of operating expenses for 2020, R&D expenses were $381.3 million and selling, general and admin expenses were $602.6 million, both decreases of 43.8% and 22.7%, respectively.
I believe that profitability will be sustained in future years as long as they continue unveiling and delivering new vehicles. Analysts at Deutsche Bank estimate 96,000 vehicles to be delivered in 2021. Furthermore, Nio plans to build more factories to accommodate the increase in manufacturing capacity.
Nio has a lot of good things going for them. They have at least three more vehicles to unveil in the future. There is no doubt that Nio will continue to develop new vehicles in the future at a rapid pace. Additionally, deliveries are growing year over year at faster rates. Nio’s 2021 vehicle deliveries for the first three months are almost half of what they delivered in all of 2020.
According to a number of analysts, the average predicted EPS for 2021 is -0.42, with the low estimate being -0.69 and the high estimate being -0.28. The average predicted revenue is $5.22 billion, with the low estimate being $3.45 billion and the high estimate being $6.15 billion.
Furthermore, since Nio turned a profit during a global pandemic, it is highly likely that Nio will continue to turn a profit this year that is larger than last year’s.
It is likely that Nio will expand to other parts of the world so that customers outside of China can purchase a Nio vehicle. When this occurs, this will drastically increase their revenue and profits.
Nio’s rapid growth as a company has proven that Nio is a potentially great investment for the long run.
Nio Stock Forecast : An Analysis of Nio Inc.
Written by Jay Devon
Edited by Tianyi Li, Jimei Shen, Calvin Ma, Jack Argiro, Michael Ding & Alexander Fleiss