If anybody was under the impression electric-powered vehicle 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 year.
The company has been a key beneficiary of the current trend for both EV manufacturers and development stocks. Following the latest annual Nio Day event, J.P. Morgan analyst Nick Lai counts four strategic milestones, exactly why he feels Nio is going to continue to trade a lot more like a fast-growth technology/EV stock compared to a carmaker.
These include the pivot out from the existing products’ Mobileye EQ4 resolution to an in-house autonomous driving (AD) answer based on Nvidia architecture. A solid state battery for the following brand new model – an ET7 sedan – boasting 150kwh capacity or range of more than 1,000km, as well as the commercialization of LiDar to provide super sensing capability on ET7.
Most intriguing of all, nonetheless, may be the first of content monetization? e.g. Advertisement as a service.
Lai believes this opens up a whole new world of monetization options for automobile manufacturers and suggests succeeding cars will be like smartphones with wheels.
For Nio’s next model, the ET7 sedan, owners are going to be able to get into a complete AD service for Rmb680 a month.
Assuming 5 7 years of use, Lai says, Cumulative payment would be similar or higher than the one time AD option payment at Xpeng or Tesla.
In the future, Lai expects Nio will ramp up content monetization revenue in various products or services.
The analyst’s sensitivity analysis suggests such content revenue might increase rapidly 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 cost objective up from fifty dolars to a neighborhood high of $75. Investors could be pocketing profits of 18 %, really should Lai’s thesis play through with the coming months. (To watch Lai’s track record, click here)
Nio has decent support amidst Lai’s colleagues, however, its present valuation provides a conundrum. NIO’s Moderate Buy consensus rating is actually based on 8 Buys and 4 Holds. Nonetheless, the share gains keep coming in thick and fast, and also the $52.28 usual priced target now suggests shares will drop by ~19 % over the following 12 months.