In case any person was under the impression electric automobile stocks would pause for a breather following 2020’s blistering rise, they forgot to hand Nio (NIO) the memo. The Chinese EV maker has seamlessly advanced into 2021, with shares already up by 31 % after the turn of year.
The company continues to be a prime beneficiary of the present trend for both EV manufacturers as well as development stocks. Sticking to the recent annual Nio Day event, J.P. Morgan analyst Nick Lai counts 4 strategic milestones, exactly why he believes Nio will continue to trade more like a fast-growth technology/EV inventory than a carmaker.
These include the pivot at a distance from the existing products’ Mobileye EQ4 solution to an in house autonomous driving (AD) solution based on Nvidia architecture. A solid-state battery for the next new model – an ET7 sedan – offering 150kwh capacity or perhaps range of over 1,000km, and the commercialization of LiDar to provide super sensing capability on ET7.
Most fascinating of all the, nonetheless, will be the beginning of articles monetization? e.g. Ad as a service.
Lai thinks this opens up a complete new world of monetization possibilities for car manufacturers and also suggests succeeding automobiles will be like smartphones with wheels.
For Nio’s next design, the ET7 sedan, owners are going to be ready to view a full AD service for Rmb680 a month.
Assuming 5 7 years of use, Lai says, Cumulative transaction would be higher or similar compared to the one-time AD choice payment at Tesla or Xpeng.
Down the road, Lai expects Nio will ramp up content monetization revenue in various services or products.
The analyst’s awareness evaluation suggests such content revenue could increase rapidly from 2022, implying accretion of equity present value of ~US$21-35/shr.
Appropriately, Lai reiterates an overweight (i.e. Buy) rating on NIO shares and bumped the cost target up from $50 to a block high of seventy five dolars. Investors could be pocketing gains of 18 %, should Lai’s thesis play out with the coming months. (In order to view Lai’s track record, click here)
Nio has good assistance amidst Lai’s colleagues, though its present valuation provides a conundrum. NIO’s Moderate Buy consensus rating is based on 8 Buys and four Holds. Nevertheless, the share gains keep coming in heavy and fast, and the $52.28 typical priced target today indicates shares will drop by ~19 % with the following 12 months.