In case anybody was under the impression electric car 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 now up by thirty one % after the turn of year.
The company has been a major beneficiary of the current trend for both EV manufacturers as well as development stocks. Sticking to the latest annual Nio Day event, J.P. Morgan analyst Nick Lai counts 4 strategic milestones, exactly why he feels Nio will continue to trade a lot more like a fast-growth technology/EV stock than a carmaker.
These include the pivot out 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 brand new model – an ET7 sedan – offering 150kwh capacity or maybe range of over 1,000km, and the commercialization of LiDar to give super-sensing capability on ET7.
Most fascinating of all, however, would be the beginning of content monetization? e.g. Advertisement as a service.
Lai believes this opens up a complete new world of monetization options for automobile makers and suggests succeeding automobiles will be as smartphones with wheels.
For Nio’s next model, the ET7 sedan, owners will be in a position to get into a complete AD service for Rmb680 a month.
Assuming 5-7 yrs of usage, Lai states, Cumulative payment will be higher or similar compared to the one time AD choice payment at Tesla or Xpeng.
In the future, Lai expects Nio will ramp up content monetization revenue in other services or products.
The analyst’s sensitivity evaluation suggests such content revenue might increase quickly 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 goal up from fifty dolars to a block high of $75. Investors could be pocketing gains of 18 %, should Lai’s thesis play out over the coming months. (to be able to view Lai’s track record, click here)
Nio has decent support amidst Lai’s colleagues, although the present valuation of its offers a conundrum. NIO’s Moderate Buy consensus rating is based on eight Buys and four Holds. Nonetheless, the share gains keep coming in heavy and fast, and the $52.28 typical price target today suggests shares will decline by ~19 % over the next 12 months.