It is not easy to replicate the success of Tesla (NASDAQ :). Having achieved a combination of large production volumes and cash generation, the California-based electric vehicle manufacturer now has a market capitalization of $ 633 billion, more than the combined value of the US “Big Three” automakers.
Hearing about Tesla's success – and its high-flying stock price – investors began betting on the shares of smaller EV manufacturers, hoping they could deliver similar returns as the global electric car market & # 39; s expanding. One such stock, which received overwhelming support from Wall Street analysts, was Chinese electric SUV manufacturer Nio (NYSE :).
New York-listed shares of Nio rose more than 1,400% over the past year, giving the company a valuation of more than $ 60 billion, more than the General Motors (NYSE 🙂 valuation earlier this year. But after hitting a record high of $ 66.99 on Jan. 11, NIO shares have lost more than 40% of their value, sparking a debate as to whether now is the right time to buy this stock.
NIO weekly chart.
The explosive rise in the number of NIO shares last year reflected investor optimism that the Shanghai-based company is best positioned to challenge Tesla in China, the world's largest EV market.
The latest edition of the company, released early this month, shows that the company is on track to sell more cars after recovering in 2019 when it faced a serious crisis from the brink of collapse.
New Delivery Record
While the automaker is still in the red and has missed analysts' consensus estimate for the fourth quarter net loss, vehicle sales are on the rise in the main battlefield for EVs. manufacturers. Nio delivered 17,353 vehicles in China in the fourth quarter, a new quarterly record.
Demand for electric vehicles in the world's largest automotive market will increase in the coming years, according to Bloomberg, as consumers embrace cleaner cars and the cost of electric cars declines.
Research firm Canalys said in a report this month that electric car sales in China could grow more than 50% by 2021, helped by an excellent network of standardized public EV chargers, good government support and a return. towards strong consumer demand.
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In a research note this month, Japan-based Mizuho Financial Group started reporting on the buy-rated electric vehicle company and said it sees "significant benefit" in its stock. The note read:
“NIO is a leader and innovator in the premium automotive EV segment; it is located in China, the largest and most productive EV market in the world. NIO sets itself apart from its competitors by offering a premium EV offering with a lower cost of ownership thanks to the new Battery-as-a-Service battery exchange module. "
Despite analysts' favorable reviews of its stocks, NIO has been under tremendous selling pressure since the company warned this month that production could be limited in the first quarter of this year due to global chip shortages.
Although monthly capacity has increased to 10,000 units, production will remain at 7,500 "due to supply chain constraints, including chip shortages," NIO CEO William Li told reporters. "While we think we will be able to meet expected demand for the second quarter, there is indeed higher risk," said Li.
Bottom Line
NIO stock looks attractive after its recent weakness, which has generated a lot of foam built up after last year's unprecedented rise. The company has a strong start in China, where it is in a good position to compete with Tesla and other players. For investors looking for exposure to the Chinese EV market, Nio offers a good entry point.
