If 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 now up by thirty one % since the turn of year.
The company has been a major 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 counts 4 strategic milestones, why he feels Nio is going to 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 answer to an in-house autonomous driving (AD) answer based on Nvidia architecture. A solid state battery for the following new model – an ET7 sedan – boasting 150kwh capacity or perhaps range of around 1,000km, and the commercialization of LiDar to provide super-sensing capability on ET7.
Many intriguing of all the, nevertheless, may be the beginning of content monetization? e.g. Ad as a service.
Lai believes this opens up a complete new world of monetization possibilities for automobile makers and also suggests succeeding automobiles will be as smartphones with wheels.
For Nio’s next model, the ET7 sedan, owners will be able to view a full AD service for Rmb680 a month.
Assuming 5 7 yrs of use, Lai states, Cumulative payment would be higher or similar compared to the one time AD option payment at Tesla or Xpeng.
In the future, Lai expects Nio will ramp up content monetization revenue in different goods and services.
The analyst’s sensitivity evaluation indicates such content revenue might 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 cost target up from fifty dolars to a block high of $75. Investors could be pocketing profits of eighteen %, really should Lai’s thesis play out with the coming months. (In order to watch Lai’s track record, click here)
Nio has good assistance amongst Lai’s colleagues, though the current valuation of its presents a conundrum. NIO’s Moderate Buy consensus rating is actually based on eight Buys and four Holds. But, the share gains keep coming in thick and fast, as well as the $52.28 usual price target now suggests shares will decline by ~19 % over the following 12 months.