Since the bear market experienced in early 2020, the retail investor has remained quite active. In fact, a group of retail traders on social media platform Reddit have orchestrated several short squeezes in meme stocks this year, resulting in massive losses for hedge funds. Here, we look at one such electric vehicle stock in NIO which is not necessarily a meme stock but is quite popular on social media.
The rising popularity of electric vehicles pushed NIO stock to record highs in early 2021. NIO gained over 1,100% in 2020, easily crushing peers and the broader markets, emerging as a worthy competitor to Tesla.
An energy vehicle giant based out of China, NIO is valued at a market cap of $66 billion, at the time of writing. The company designs, develops, manufactures, and sells smart EVs in China. It currently offers five-, six-, and seven-seater SUVs as well as smart sedans. Further, NIO also provides energy and service packages to customers including power solutions such as:
China is the largest electric vehicle market in the world and the increase in purchasing power of the country’s middle class makes NIO a solid long-term buy. In the second quarter of 2021, NIO’s sales touched $1.31 billion, a year-over-year growth of 172.2%.
Sales were also $20 million above consensus forecasts. Its adjusted earnings per share of $0.03 were higher than an expected loss of $0.11 per share. The company’s vehicle deliveries rose by a stellar 127% to 21,896 cars.
In the third quarter, vehicle deliveries have been estimated between 23,000 and 25,000 and the company’s CEO explained that while the monthly order intakes keep growing, delivery volume is determined by the overall capacity of the supply chain. The recent COVID-19 outbreaks near NIO’s manufacturing facilities have also impacted production capacity.
NIO delivered 44,000 SUVs last year and this figure has increased to 71,000 in the last 12-months. Investors should also note that NIO’s three SUV models are produced by Jianghuai Automobile Group which is a state-owned auto manufacturer. The joint venture has been renewed until May 2024 and will double NIO’s manufacturing capabilities to 240,000 vehicles annually.
NIO is forecast to increase sales to $5.7 billion in 2021 and to $9.34 billion in 2022. Comparatively, its loss per share is expected to narrow from $0.73 in 2020 to $0.13 in 2022. While NIO enjoys a leadership position in China, it's looking to enter the European markets including Norway where EV shipments were more than combustible engines in 2020.
NIO recently unveiled its first sedan called the ET7 which will be available for purchase in late 2022 and a key revenue driver for the firm. The 150-kWh variant has a range of 1,000 kilometers (over 620 miles).
NIO stock might seem overvalued but its enviable growth supports a steep multiple.