In case anybody was under the impression electric-powered 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 thirty one % after the turn of year.
The company continues to be a key beneficiary of the current trend for both EV makers as well as growth stocks. Following the recent annual Nio Day event, J.P. Morgan analyst Nick Lai matters 4 strategic milestones, why he thinks Nio will continue to exchange more like a fast growth technology/EV stock than a carmaker.
These include the pivot out from the existing products’ Mobileye EQ4 resolution 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.
The majority of fascinating of all the, however, may be the first of content monetization? e.g. Advertisement as a service.
Lai feels this opens up a whole new world of monetization possibilities for automobile makers and suggests succeeding automobiles will be like smartphones with wheels.
For Nio’s next model, the ET7 sedan, owners are going to be able to view a total AD service for Rmb680 a month.
Assuming 5-7 yrs of usage, Lai says, Cumulative transaction would be similar or higher 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 different services or products.
The analyst’s sensitivity analysis suggests some content revenue might increase quickly from 2022, implying accretion of equity present value of ~US$21 35/shr.
Appropriately, Lai reiterates a heavy (i.e. Buy) rating on NIO shares and bumped the price objective up from $50 to a street high of seventy five dolars. Investors may be pocketing profits of eighteen %, should Lai’s thesis play out over the coming months. (To view Lai’s track record, click here)
Nio has decent assistance amongst Lai’s colleagues, but the current valuation of its presents a conundrum. NIO’s Moderate Buy consensus rating is based on 8 Buys and 4 Holds. However, the share gains keep coming in thick and fast, and the $52.28 typical priced target now indicates shares will decline by ~19 % over the following 12 months.