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 now up by thirty one % after the turn of year.
The company has been a prime beneficiary of the present trend for both EV makers and growth stocks. Sticking to the recent annual Nio Day event, J.P. Morgan analyst Nick Lai matters four strategic milestones, exactly the reason he feels Nio is going to continue to trade a lot more like a fast-growth technology/EV inventory compared to a carmaker.
These include the pivot away from the existing products’ Mobileye EQ4 solution to an in-house autonomous driving (AD) answer based on Nvidia architecture. A solid state battery for the next new model – an ET7 sedan – offering 150kwh capacity or range of more than 1,000km, and the commercialization of LiDar to deliver super-sensing capability on ET7.
Most fascinating of all the, nevertheless, may be the first of content monetization? e.g. Advertisement as a service.
Lai believes this opens up a whole new world of monetization possibilities for car manufacturers and suggests succeeding automobiles will be like smartphones with wheels.
For Nio’s next design, the ET7 sedan, owners will be ready to get into a total AD service for Rmb680 a month.
Assuming 5-7 years of use, Lai says, Cumulative transaction will be higher or similar than 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 indicates some content revenue could 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 purchase price goal up from $50 to a neighborhood high of seventy five dolars. Investors will be able to be pocketing gains of eighteen %, should Lai’s thesis play out over the coming months. (In order to view Lai’s track record, click here)
Nio has good support amongst Lai’s colleagues, though the current valuation of its presents a conundrum. NIO’s Moderate Buy consensus rating is based on eight Buys and four Holds. Nevertheless, the share gains keep coming in dense and fast, as well as the $52.28 average priced target now suggests shares will decline by ~19 % over the next twelve months.