Investor enthusiasm for electric vehicle manufacturers received widespread approval this week when the S&P Jones Indices said Tesla (NASDAQ 🙂 would enter the index on December 21st.
The move was widely anticipated after the company posted gains in four consecutive quarters – an important requirement to qualify for the world's most followed index. These positive developments have contributed to Tesla's stock seeing an incredible rise this year, up 481%.
After seeing Tesla's success, investors are now turning their attention to smaller stocks of electric vehicles, in the hope that these could yield similar returns as the electric car market gains support from governments over the whole world.
For example, China could be a major growth engine for the electric vehicle (EV) market in the next decade, with the government boosting electric vehicle developers. Beijing wants new energy vehicles to make up 15% or more of the market by 2025.
One of those stocks that is getting overwhelming support from Wall Street analysts today is Chinese electric SUV manufacturer NIO (NYSE :). New York-listed shares of NIO are up more than 1,000% this year, making the company worth more than $ 60 billion – making it worth more than General Motors Company (NYSE :).
NIO 1-Year Graph.
The starting price for a NIO ES6 SUV is approximately $ 54,000, more than a third higher than Tesla & # 39; s popular Model 3 sedan. But what sets NIO apart is its services, including leasing and its battery changing stations. The company is also working on self-driving technology and plans to launch its robot taxi fleet by 2022. NIO sold 20,565 cars last year, an increase of 81% year-on-year.
On the Edge of Collapse
However, like Tesla, NIO has a troubled past. Last year, it faced a serious liquidity crisis that left investors uncertain about the future. That situation has changed since April. That's when state-backed investors provided liquidity and saved the company from near-collapse.
Along the way, Tesla & # 39; s strong rebound also changed sentiment for EV manufacturers, allowing NIO to raise $ 1.7 billion from a stock offering in September. In addition, the Chinese EV market has rebounded strongly from the coronavirus slump.
NIO's sales for the end of September were up 146% from a year earlier. The company delivered 12,206 cars in the quarter, up 154% year-on-year. This impressive earnings prompted many analysts to raise their price targets for NIO this week.
Bank of America more than doubled its stock price target to $ 54.70, while Deutsche Bank and JPMorgan also increased their targets, with each firm raising its forecast to $ 50. These analysts were encouraged by ambitious expansion plans. NIO that could challenge Tesla's Model 3 sedan in China.
On Wednesday, according to a Bloomberg report, CEO William Li said the following in a conference call:
“We will be launching a sedan soon, and we are currently developing another. So the next two products in line will both be sedans. "
NIO also plans to enter the European market from the second half of 2021, targeting its premium brands.
Bottom Line
NIO comes out to be a great growth story in 2020, helped by the rapid shift in consumer and investor perceptions about electric cars & # 39; s. That said, there is no guarantee that this smaller player will be able to succeed in a market that is getting busier as the conventional car giants make their entrance. Investors are therefore advised to proceed with caution.
