WUHAN, CHINA – OCTOBER 21: A NIO ES8 electric sport utility vehicle (SUV) is on display during Wuhan … [+]
Nio (NYSE: NIO), the Chinese premium EV maker, saw its stock rise by about 10% over the last month (around 21 trading days), outperforming the S&P 500 which rose by about 3% over the same period. While the stock faced some pressure in September due to the Evergrande debt crisis in China and concerns over rising bond yields, it has recovered recently driven by a couple of factors. Firstly, Nio said that it would double the capacity of its plant in Hefei, China to 240,000 vehicles a year, up from 120,000 units, with the expansion likely to be completed by the first half of 2022. In fact, the company says that the facility could produce as many as 300,000 cars a year with extra operating shifts. This should allow the company to cater to EV demand, which has remained robust. Secondly, there have been some positive developments for Nio’s EV peer Tesla, which posted solid Q3 earnings and won a 100,000 vehicle order from rental car major Hertz. This appears to have boosted sentiment across the EV sector.
Now, is NIO stock poised to grow? Based on our machine learning analysis of trends in the stock price over the last three years, there is a 60% chance of a rise in NIO stock over the next month (twenty-one trading days). See our analysis on Nio Chance Of Rise for more details.
Five Days: NIO 1.1%, vs. S&P 500 1.2%; Underperformed market
(47% Event Probability)
Ten Days: NIO 14%, vs. S&P500 5.2%; Outperformed market
(24% event probability)
Twenty-One Days: NIO 10%, vs. S&P500 3%; Outperformed market
(41% event probability)
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[10/7/2021] What’s New With Nio Stock?
Nio stock (NYSE: NIO) declined by almost 4% over the last week (five trading days) and also remains down by about 17% over the last month. While the sell-off is driven largely by macro factors, such as the Evergrande crisis in China and rising bond yields, there has actually been positive news on the business front for Nio. Nio recently posted stronger than expected delivery growth, with its EV sales standing at 24,439 units over Q3 2021, ahead of the upper end of the company’s guidance of 23,500 units and up almost 2x versus last year. The company also delivered a total of 10,628 vehicles in September, a monthly record and a year-over-year increase of 126%. These growth rates are particularly encouraging, as they come despite the ongoing chip shortage, which has hurt production across the auto industry. So is Nio stock likely to decline further, or are gains looking more likely? Going by historical performance, there is an equal chance of a rise or fall in Nio stock over the next month after declining by 17% over the last month (21 trading days). Check out our analysis Nio Stock Chance Of A Rise for more details.
That said, we think Nio still looks quite attractive for longer-term investors. Although Nio stock trades at a relatively high 10x consensus 2021 revenues, it should grow into this valuation fairly quickly. Sales are projected to grow by about 120% this year and by almost 65% next year, per consensus estimates. Margins have also shown an increasing trend, with gross margins increasing from levels of around 8% in Q2 202o to around 19% in Q2 2021, meaning that Nio should be quite profitable as it scales up. Now with the stock down by about 37% year-to-date and by over 45% from its all-time highs, this could present a nice entry point for investors.
[9/22/2021] Evergrande Crisis Knocks 8% Off Nio Stock, What’s Next?
Nio stock (NYSE: NIO) declined by around 8% over the last week (five trading days) compared to the S&P 500 which fell by around -2.4% over the same period. The stock also remains down by about 5.5% over the past month. There are a couple of developments that have hit Nio and other Chinese EV stocks recently. Last week, China’s minister for industry and information technology said that the country has “too many” EV players, and this is likely causing some apprehension among investors that the EV space could see more interference from the Chinese state, given the big regulatory crackdown on Chinese Internet companies in recent months. Separately, there are concerns that China’s second-largest real estate developer, the struggling Evergrande group, could default on its debt. The company apparently has liabilities to the tune of around $300 billion and a default could impact Chinese banks and credit markets, potentially spilling over to other areas of the Chinese economy. Evergrande also invested considerably in an EV subsidiary that hasn’t shipped any vehicles to date and this is also likely causing some overhang on EV stocks.
But now that Nio stock has seen a -5.5% move over the last month or so, will it continue its downward trajectory, or is a recovery imminent? Going by historical performance, there is an equal chance of a rise or fall in Nio stock over the next month. Out of 279 instances in the last three years that Nio stock saw a 21-day decline of 5.5% or more, 142 of them resulted in NIO stock declining over the subsequent one-month period (21 trading days). This historical pattern reflects 142 out of 279, or about 51% chance of a drop in Nio stock over the next month. See our analysis Nio Stock Chance Of Decline for more details.
Calculation of ’Event Probability’ and ’Chance of Rise’ using last three year data
Predict average return on Nio Stock Return: AI Predicts NIO Average and Excess Return After a Fall or Rise
Nio Stock Return (Recent) Comparison With Peers
[9/8/2021] Nio Is Poised For A Strong September. Is The Stock A Buy?
Nio stock (NYSE: NIO) gained over 7% over the last week (five trading days) compared to the S&P 500 which remained roughly flat over the same period. Although Nio posted weak August delivery numbers which dropped about 26% from July to about 5,880 units, on account of some supply chain constraints, things are set to look up. Nio’s quarterly guidance of 22,500 to 23,500 vehicles for Q3 2021 implies that deliveries for September could jump to over 9,000 vehicles marking a monthly record. This could indicate that Nio is finally tackling the ongoing automotive semiconductor shortage, which has impacted production across the auto industry. So will Nio stock continue to rally, or is a decline looking more likely? Per the Trefis machine learning engine which analyzes historical stock price data, Nio stock has an equal chance of a rise or fall over the next month. See our analysis Nio Stock Chances Of Rise for more details.
So, is Nio stock worth considering for longer-term investors? We think it is. Although Nio stock trades at a relatively high 12x consensus 2021 revenues, it should grow into this valuation fairly quickly. Sales are projected to more than double this year and growth is likely to come in at over 65% in 2022 as well, per consensus estimates. The company has multiple new launches slated for 2022, including its first sedan, dubbed the ET7, which is expected to offer a range of around 1,000 kilometers (621 miles). Demand should hold up in the long term, as the Chinese government wants about 20% of all new car sales to come from new energy vehicles that do not run on gasoline, from 2025 onward. Nio’s early mover advantage in the Chinese premium EV space, and its investments in charging stations and related infrastructure, should give it an edge as the market expands. Nio is also poised to become more profitable going forward. Gross margins rose from levels of around 8% in Q2 202o to around 19% in Q2 2021. As revenues scale up, this should help Nio’s bottom line, as well.
[7/28/2021] Will Chinese Government Crackdown On Tech Companies Impact Nio?
Nio – one of China’s most valuable electric vehicle companies – saw its stock decline by about 8% in Tuesday’s trading and remains down by about 11% over the last week (five trading days). The decline follows a broader sell-off in Chinese stocks, as China’s regulators continued to crack down on big businesses. Last weekend, authorities ordered major Chinese online education providers to become nonprofits, while forbidding them from raising funds from public markets. Chinese big-tech companies have also come under scrutiny. E-commerce giant Alibaba was recently forced to shelve the IPO of its affiliate financial company ANT group, while food delivery platforms such as Meituan are also facing pressure, as the government now requires them to guarantee their riders with an income that is above minimum wage, among other benefits. So should Nio investors be concerned about the recent actions or does the drop in the stock price present a buying opportunity for investors?
Although investors are right to be concerned about the mounting risks of investing in Chinese stocks, given the slew of regulatory actions in recent months, we think the sell-off in EV companies such as Nio is probably overdone. Unlike the big tech players, which are typically platform businesses with significant power, EVs are, at least in a relative sense, fledgling businesses that are seen as crucial to achieving China’s aggressive emissions reduction targets. Separately, unlike education and tech, which are predominantly domestic businesses, catering to Chinese customers and facing limited foreign competition, EV players compete head-on with global names such as Tesla. Moreover, unlike Chinese education players and big-tech companies with a limited market overseas, EV players are also looking to make inroads into international markets, as well. Considering this, we think it’s unlikely that the state would look to harm EV players in any way.
See our analysis on Nio Stock Chances Of Rise for an overview of the stock’s performance and how it is expected to trend in the coming weeks.
[7/6/2021] Chinese EV Stocks
The top U.S. listed Chinese electric vehicle players Nio (NYSE: NIO), Xpeng (NYSE: XPEV), and Li Auto (NASDAQ: LI) all posted record delivery figures for June, as the automotive semiconductor shortage, which previously hurt production, shows signs of abating, while demand for EVs in China remains strong. While Nio delivered a total of 8,083 vehicles in June, marking a jump of over 20% versus May, Xpeng delivered a total of 6,565 vehicles in June, marking a sequential increase of 15%. Nio’s Q2 numbers were roughly in line with the upper end of its guidance, while Xpeng’s figures beat its guidance. Li Auto posted the biggest jump, delivering 7,713 vehicles in June, an increase of over 78% versus May. Growth was driven by strong sales of the upgraded version of the Li-One SUV. Li Auto also beat the upper end of its Q2 guidance of 15,500 vehicles, delivering a total of 17,575 vehicles over the quarter.
Now, although growth has certainly picked up, the stocks don’t exactly appear cheap at current valuations. Nio and Xpeng trade at 15x forward revenue, while Li Auto trades at 10x. Near-term threats to EV valuations include higher inflation and recent commentary by the U.S. Federal Reserve, which is now apparently looking at two interest rate hikes in 2023, instead of 2024. This could put pressure on high-multiple, high-growth stocks, including EV names. In our analysis Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? we compare the financial performance and valuations of the major U.S.-listed Chinese electric vehicle players.
[6/21/2021] Chinese EV Stocks Fully Priced After Recent Rally?
The stocks of Chinese EV players have surged over the last month, largely reversing the effects of the sell-off seen earlier this year. Nio stock (NYSE: NIO) has rallied by almost 38% over the last month, Li Auto (NASDAQ: LI) gained 45%, and Xpeng (NYSE: XPEV) surged by almost 58%. Now although the three companies posted mixed delivery figures for the month of May, with Nio and Li Auto both posting declines in their deliveries versus April, and Xpeng growing sales marginally, the sales numbers likely weren’t as bad as expected, considering the semiconductor shortage that has roiled the auto industry. In contrast, major auto players such as GM and Ford had to temporarily idle or scale back production at several plants.
The outlook provided by the three companies was also stronger than expected, giving investors confidence that the worst of the semiconductor shortage is likely over. Li Auto has guided to 14,500 to 15,500 deliveries for the second quarter, a sequential increase of 22% on the upper end. The company says that it is optimistic that actual numbers will exceed guidance, given that it is seeing stronger than expected orders for the upgraded version of its Li-One SUV. Nio also reiterated its Q2 2021 delivery guidance of 21,000 to 22,000 vehicles, implying that it could deliver a record 8,200 vehicles in June.
Now are the stocks a buy at current levels? While the growth outlook is certainly strong, the stocks don’t exactly appear cheap at current valuations. Nio trades at 14x forward revenue, while Li Auto trades at 9x, and Xpeng trades at about 16x. Near-term threats to EV valuations include higher inflation and recent commentary by the U.S. Federal Reserve, which is now apparently looking at two interest rate hikes in 2023, instead of 2024. This could put pressure on high-multiple, high-growth stocks, including EV names. In our analysis Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? we compare the financial performance and valuations of the major U.S.-listed Chinese electric vehicle players.
[6/2/2021] Is The Worst Of The Semiconductor Crunch Over For Chinese EVs?
Chinese electric vehicle majors Nio (NYSE: NIO) and Xpeng (NYSE: XPEV) provided mixed delivery figures for the month of May, as they continued to be impacted by the current shortage of semiconductors. While Nio delivered a total of 6,711 vehicles in May, down 5.5% from April, Xpeng was able to grow deliveries by about 10% over the last month to 5,686 units, although the number is below peak monthly sales of 6,015 vehicles witnessed in January. Although both companies reported robust year-over-year growth numbers (2x to 6x), the sequential figures are more closely tracked for fast-growing companies.
However, things are probably going to get better from here. Nio, for instance, reiterated its Q2 2021 delivery guidance of 21,000 to 22,000 vehicles, implying that it could deliver as many as 8,200 vehicles in June, a monthly record. This is likely an indicator that the global automotive semiconductor shortage is easing off, and also a sign that Nio is holding its own in the Chinese EV market, despite mounting competition. Nio stock rallied by almost 10% in Tuesday’s trading, while Xpeng’s stock was up by about 8% following the report.
Despite the recent rally, the stocks might still be worth considering at current levels. Nio stock remains down by about 20% year-to-date while Xpeng is down by about 22%. See our analysis on Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for an overview of the financial and valuation metrics of the three U.S. listed Chinese EV players.
[5/21/2021] How Do Chinese EV Stocks Compare?
U.S. listed Chinese EV players Nio (NYSE: NIO), Xpeng (NYSE: XPEV), and Li Auto (NASDAQ: LI) have underperformed this year, with their stocks down by roughly 30% each, since early January. So how do these stocks compare post the correction? While Nio and Xpeng remain pricier compared to Li Auto, they probably justify their higher valuation for a couple of reasons. Here is a bit more about these companies.
Our analysis Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? compares the financial performance and valuation of the major U.S. listed Chinese electric vehicle players.
Nio remains the most richly valued of the three companies, trading at about 10.5x forward revenue. Revenues are likely to grow by over 110% this year, per consensus estimates. Longer-term growth is also likely to remain strong, given the company’s wide product portfolio (it already has three models on the market), its unique innovations such as battery swapping, its global expansion plans, and investments into autonomous driving. Nio brand also has a lot more buzz, with the company viewed as the most direct rival to Tesla in China. Gross margins stood at 19.5% in Q1 2021, up from a negative 12% a year ago.
Xpeng trades at about 10x projected 2021 revenues. Sales growth is projected to be the strongest among the three companies, rising by over 150% this year, per consensus estimates. Besides its higher projected growth, investors have been assigning a premium to the company due to its progress in the autonomous driving space. Xpeng currently sells the G3 SUV and the P7 sedan and its new P5 compact sedan is likely to hit the roads later this year. Although Xpeng’s gross margins have improved, rising to about 11% over Q1, versus negative levels a year ago, they are still below Nio’s margins.
Li Auto trades at just 6x projected 2021 revenues, the lowest of the three companies. Revenues are likely to roughly double this year, with gross margins standing at 17.5% as of Q4 2020 (the company has yet to report Q1 results). The lower valuation is likely due to the company’s focus on a single product – the Li Xiang ONE, an electric SUV that also has a small gasoline engine and also due to the fact that Li Auto is behind rivals in terms of autonomous driving tech.
[10/30/2020] How Do Nio, Xpeng, and Li Auto Compare
The Chinese electric vehicle space is booming, with China-based manufacturers accounting for over 50% of global EV deliveries. Demand for EVs in China is likely to remain robust as the Chinese government wants about 25% of all new cars sold in the country to be electric by 2025, up from roughly 5% at present.  While Tesla is a leader in the Chinese luxury EV market driven by production at its new Shanghai facility, Nio, Xpeng (NYSE: XPEV), and Li Auto (NASDAQ: LI) – three relatively young U.S. listed Chinese electric vehicle players, have also been gaining traction. In our analysis Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare?we compare the financial performance and valuation of the major U.S. listed Chinese electric vehicle players. Parts of the analysis are summarized below.
Overview Of Nio, Li Auto & Xpeng’s Business
Nio, which was founded in 2014, currently offers three premium electric SUVs, ES8, ES6, and EC6, which are priced starting at about $50k. The company is working on developing self-driving technology and also offers other unique innovations such as Battery as a Service (BaaS) – which allows customers to subscribe for car batteries, rather than paying for them upfront. While the company has scaled up production, it hasn’t come without challenges, as it recalled about 5,000 vehicles last year after reports of multiple fires.
Li Auto sells Extended-Range Electric Vehicles, which are essentially EVs that also have a small gasoline engine that can generate additional electric power for the battery. This reduces the need for EV-charging infrastructure, which is currently limited in China. The company’s hybrid strategy appears to be paying off – with its Li ONE SUV, which is priced at about $46,000 – ranking as the top-selling SUV in the new energy vehicle segment in China in September 2020. The new energy segment includes fuel cell, electric, and plug-in hybrid vehicles.
Xpeng produces and sells premium electric vehicles including the G3 SUV and the P7 four-door sedan, which are roughly positioned as rivals to Tesla’s Model Y SUV and Model 3 sedan, although they are more affordable, with the basic version of the G3 starting at about $22,000 post subsidies. The G3 SUV was among the top 3 Electric SUVs in terms of sales in China in 2019. While the company began production in late 2018, initially via a deal with an established automaker, it has started production at its own factory in the Guangdong province.
How Have The Deliveries, Revenues & Margins Trended
Nio delivered about 21k vehicles in 2019, up from about 11k vehicles in 2018. This compares to Xpeng which delivered about 13k vehicles in 2019 and Li Auto which delivered about 1k vehicles, considering that it began production only late last year. While Nio’s deliveries this year could approach about 40k units, Li Auto and Xpeng are likely to deliver around 25k vehicles with Li Auto seeing the highest growth. Over 2019, Nio’s Revenues stood at $1.1 billion, compared to about $40 million for Li Auto and $330 million for Xpeng. Nio’s Revenues are likely to grow 95% this year, while Xpeng’s Revenues are likely to grow by about 120%. All three companies remain deeply lossmaking as costs related to R&D and SG&A remain high relative to Revenues. Nio’s Net Margins stood at -195% in 2019, Li Auto’s margins stood at about -860% while Xpeng’s margins stood at -160%. However, margins are likely to improve sharply in 2020, as volumes pick up.
Nio’s Market Cap stood at about $37 billion as of October 28, 2020, with its stock price rising by about 7x year-to-date due to surging investor interest in EV stocks. Li Auto and Xpeng, which were both listed in the U.S. around August as they looked to capitalize on surging valuations, have a market cap of about $15 billion and $14 billion, respectively. On a relative basis, Nio trades at about 15x projected 2020 Revenues, Li Auto trades at about 12x, while Xpeng trades at about 20x.
While valuations are certainly high, investors are likely betting that these companies will continue to grow in the domestic market, while eventually playing a larger role in the global EV space leveraging China’s relatively low-cost manufacturing, and the country’s ecosystem of battery and auto parts suppliers. Of the three companies, Nio might be the safer bet, considering its slightly longer track record, higher Revenues, and investments in technology such as battery swaps and self-driving. Li Auto also looks attractive considering its rapid growth – driven by the uptake of its hybrid powertrains – and relatively attractive valuation of about 12x 2020 Revenues.
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