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Wall Street has been looking at Nio Limited (NIO) of late, and investors seem to like what they see. Over the past 12 months, NIO stock is up a whooping 1017%, and remains close to its 52-week high. It probably hasn't hurt that the Chinese EV manufacturer released solid December car deliveries, showing a huge step forward.
As expected, the fund-raising dip in December was another buying opportunity. The forecasted large growth rate in the Chinese EV market should lead to another big year for Nio.
Big Monthly Delivery Increase
Nio delivered 7,007 units during December for a big step up from the 5,291 in November. The Chinese EV company had generally seen small monthly delivery increases since April as the sector raced ahead.
For December, Nio had a nearly equal delivery of ES8, ES6 and EC6 models. In total, Q4 deliveries were 17,353 EVs while the full-year count was only 43,728 vehicles. The company is already on an annualized rate of 84,000 cars.
In comparison XPeng (XPEV) had 5,700 deliveries while Tesla (TSLA) reached totals of nearly 500,000 units for the year. Nio remains a leader in China, but the company is far behind Tesla as a global EV manufacturer.
The company unveiled a new sedan called the ET7 at the fourth Nio Day on January 9. The EV will cost between $70K and $85K so the company isn’t going to catch up with competitors on volumes with the ET7.
Possibly the biggest news was a 150 kilowatt-hour battery pack with a claimed range of 625 miles. Batter technology will remain a distinguishing factor in EV sales.
Chinese Market Surge
The Chinese EV market is set to surge to 1.8 million vehicles in 2021, up 40% from 1.3 million vehicles last year. Despite the 100% growth rate in 2021, Nio still only has a fraction of the business.
While the company selling shares at only $39 last month now seems ill timed with the stock near $60, Nio is poised with capital to build out manufacturing and further attack a market where the company only has EV market share in the 3% range. The total Chinese vehicle market approaches 3 million units monthly so Nio hardly registers on total sales. Due to this vast opportunity, the company raised another $1.3 billion via convertible debt. In total, Nio has raised over $4 billion in the last month to fund growth.
Analysts have sales nearly doubling to $4.6 billion this year and surging again to $7.5 billion in 2022. The greenfield market opportunity in China appears to easily support Nio reaching these sales targets. However, the stock has a market value of $90 billion, so it will dip on any missteps.
The key investor takeaway is that Nio appears poised to further capture market share in a growing Chinese EV market. The company continues to innovate in battery technology and autonomous driving.
As always, Chinese stocks have additional risks due to regulatory concerns and transparency issues. Those interested in the Nio story and willing to take the risk should use any pain from news of new competitors entering the market as an opportunity to the EV stock.
Overall, Wall Street is divided on NIO shares, a circumstance reflected in the Moderate Buy analyst consensus rating. That rating is based on 13 reviews, including 7 Buys and 6 Holds. (See NIO stock analysis on TipRanks)
Disclosure: No position.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.