If anyone 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 % since the turn of season.
The company has been a major beneficiary of the current trend for both EV manufacturers as well as growth stocks. Sticking to the latest annual Nio Day event, J.P. Morgan analyst Nick Lai matters 4 strategic milestones, exactly why he thinks Nio will continue to trade more like a fast-growth technology/EV inventory compared to a carmaker.
These include the pivot away from the existing products’ Mobileye EQ4 answer to an in-house autonomous driving (AD) solution based on Nvidia architecture. A solid state battery for the following brand new model – an ET7 sedan – offering 150kwh capacity or range of around 1,000km, and the commercialization of LiDar to give super-sensing capability on ET7.
Most fascinating of all, nevertheless, may be the beginning of articles monetization? e.g. Ad as a service.
Lai believes this opens up a whole new world of monetization possibilities for car manufacturers and also suggests future automobiles will be as smartphones with wheels.
For Nio’s next model, the ET7 sedan, owners will be ready to access a total AD service for Rmb680 a month.
Assuming 5-7 years of usage, Lai states, Cumulative transaction will be similar or higher 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 goods and services.
The analyst’s sensitivity analysis suggests some content revenue could increase quickly from 2022, implying accretion of equity present value of ~US$21-35/shr.
Accordingly, Lai reiterates a heavy (i.e. Buy) rating on NIO shares and bumped the retail price target up from fifty dolars to a neighborhood high of seventy five dolars. Investors may be pocketing gains of 18 %, ought to Lai’s thesis play out over the coming months. (to be able to watch Lai’s track record, click here)
Nio has decent support amongst Lai’s colleagues, although the present valuation of its presents a conundrum. NIO’s Moderate Buy consensus rating is based on eight Buys and four Holds. However, the share gains keep coming in dense and fast, and the $52.28 average priced target now indicates shares will decline by ~19 % with the following twelve months.