Got Guts? Buy Nio Stock at This Super-High Valuation, , on October 16, 2020 at 4:41 pm

Financial News
By
On October 16, 2020
In Financial News
Tags:

From mid-May 2020 to mid-October, shares of Chinese electric vehicle-maker NIO Limited (NIO) have run up more than seven times in price — 733% to be precise. Recognizing his error in not recommending the stock earlier, JPMorgan’s Head of Asia Auto Research Nick Lai issued a mea culpa this week: “Admittedly, we missed the stock’s major rally YTD.”But better late than never.Even if Lai missed the last 733 percentage points worth of gains, he thinks there’s still time for investors to catch the next 44% profit, and for this reason, Lai has upgraded NIO shares to “overweight” with a $40 price target. (To watch Lai’s track record, click here)Why does Lai think there are still gains to be had here? In a nutshell, because the Chinese car market is changing. What is going on today, explains the analyst, is similar to “the transition from feature phone to smartphone over 2007-2014.” An entire type of product — cars powered by internal combustion engines — is being made obsolete and replaced by a new type of product: “new energy vehicles” (NEVs, include both fully electric cars and plug-in hybrids).Chinese car-buyers are adopting these new electric vehicles in droves. And adding electric fuel to the fire, Lai argues that as EV car prices reach “parity” with the cost of gasoline-powered automobiles (around about 2022 or 2023), the initial wave of EV purchasing by businesses will be supplemented by consumers stepping up to buy electrics as their personal vehicles — sustaining the sales momentum for years to come.Currently, about 5% of the Chinese automobile market (21.4 million cars sold in 2019 — 25% more than in the U.S.) is electric. But the analyst projects that this market share will quadruple or even quintuple by 2025, to as many as 20% or even 25% of all cars sold in the Middle Kingdom. Annualized, that would work out to a compound annual growth rate in sales of 41% through 2025.Now, what does all of this mean for NIO stock in particular?NIO is one of China’s four biggest electric vehicle makers. It currently boasts two electric SUVs for sale, the ES8 and ES6, recently introduced its EC6 crossover electric vehicle, and is expected to unveil a new electric sedan in December. According to Lai, at its current rate of growth, NIO will be capturing as much as 30% of all “premium passenger” EVs by 2025, and about 7% of total EV sales, making it “a long term winner in the premium space among Chinese brands.”Extrapolating a sales number from that size market share, the analyst argues NIO could currently be worth about 3x fiscal 2025 sales — a sizeable discount to Tesla’s current valuation of more than 5x fiscal 2025 estimated sales. On the face of it, that sounds reasonable… if, that is to say, you take it as a given that Tesla stock is not vastly overpriced already.It’s also worth pointing out that industry giants Ford and General Motors, both of which are gearing up sizeable EV operations of their own, currently sell for just 0.2x and 0.4x trailing-12-month sales — i.e. sales that these companies have actually already made, and not sales that they might or might not eventually make five years from now.Viewed from that perspective, JPMorgan’s valuation of NIO at 3x FY 2025 sales seems a bit optimistic.Overall, NIO holds a Moderate Buy rating from the analyst consensus, based on 7 “buy,” 2 “hold,” and 1 “sell” ratings. However, with shares trading at $28.48, the average price target of $21.72 implies a 24% downside. (To see NIO stock analysis on TipRanks, click here)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.,

Got Guts? Buy Nio Stock at This Super-High ValuationFrom mid-May 2020 to mid-October, shares of Chinese electric vehicle-maker NIO Limited (NIO) have run up more than seven times in price — 733% to be precise. Recognizing his error in not recommending the stock earlier, JPMorgan’s Head of Asia Auto Research Nick Lai issued a mea culpa this week: “Admittedly, we missed the stock’s major rally YTD.”But better late than never.Even if Lai missed the last 733 percentage points worth of gains, he thinks there’s still time for investors to catch the next 44% profit, and for this reason, Lai has upgraded NIO shares to “overweight” with a $40 price target. (To watch Lai’s track record, click here)Why does Lai think there are still gains to be had here? In a nutshell, because the Chinese car market is changing. What is going on today, explains the analyst, is similar to “the transition from feature phone to smartphone over 2007-2014.” An entire type of product — cars powered by internal combustion engines — is being made obsolete and replaced by a new type of product: “new energy vehicles” (NEVs, include both fully electric cars and plug-in hybrids).Chinese car-buyers are adopting these new electric vehicles in droves. And adding electric fuel to the fire, Lai argues that as EV car prices reach “parity” with the cost of gasoline-powered automobiles (around about 2022 or 2023), the initial wave of EV purchasing by businesses will be supplemented by consumers stepping up to buy electrics as their personal vehicles — sustaining the sales momentum for years to come.Currently, about 5% of the Chinese automobile market (21.4 million cars sold in 2019 — 25% more than in the U.S.) is electric. But the analyst projects that this market share will quadruple or even quintuple by 2025, to as many as 20% or even 25% of all cars sold in the Middle Kingdom. Annualized, that would work out to a compound annual growth rate in sales of 41% through 2025.Now, what does all of this mean for NIO stock in particular?NIO is one of China’s four biggest electric vehicle makers. It currently boasts two electric SUVs for sale, the ES8 and ES6, recently introduced its EC6 crossover electric vehicle, and is expected to unveil a new electric sedan in December. According to Lai, at its current rate of growth, NIO will be capturing as much as 30% of all “premium passenger” EVs by 2025, and about 7% of total EV sales, making it “a long term winner in the premium space among Chinese brands.”Extrapolating a sales number from that size market share, the analyst argues NIO could currently be worth about 3x fiscal 2025 sales — a sizeable discount to Tesla’s current valuation of more than 5x fiscal 2025 estimated sales. On the face of it, that sounds reasonable… if, that is to say, you take it as a given that Tesla stock is not vastly overpriced already.It’s also worth pointing out that industry giants Ford and General Motors, both of which are gearing up sizeable EV operations of their own, currently sell for just 0.2x and 0.4x trailing-12-month sales — i.e. sales that these companies have actually already made, and not sales that they might or might not eventually make five years from now.Viewed from that perspective, JPMorgan’s valuation of NIO at 3x FY 2025 sales seems a bit optimistic.Overall, NIO holds a Moderate Buy rating from the analyst consensus, based on 7 “buy,” 2 “hold,” and 1 “sell” ratings. However, with shares trading at $28.48, the average price target of $21.72 implies a 24% downside. (To see NIO stock analysis on TipRanks, click here)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

,

Instant Quote

Enter the Stock Symbol.

Select the Exchange.

Select the Type of Security.

Please enter your First Name.

Please enter your Last Name.

Please enter your phone number.

Please enter your Email Address.

Please enter or select the Total Number of Shares you own.

Please enter or select the Desired Loan Amount you are seeking.

Please select the Loan Purpose.

Please select if you are an Officer/Director.

High West Capital Partners, LLC may only offer certain information to persons who are “Accredited Investors” and/or “Qualified Clients” as those terms are defined under applicable Federal Securities Laws. In order to be an “Accredited Investor” and/or a “Qualified Client”, you must meet the criteria identified in ONE OR MORE of the following categories/paragraphs numbered 1-20 below.

High West Capital Partners, LLC cannot provide you with any information regarding its Loan Programs or Investment Products unless you meet one or more of the following criteria. Furthermore, Foreign nationals who may be exempt from qualifying as a U.S. Accredited Investor are still required to meet the established criteria, in accordance with High West Capital Partners, LLC’s internal lending policies. High West Capital Partners, LLC will not provide information or lend to any individual and/or entity that does not meet one or more of the following criteria:

1) Individual with Net Worth in excess of $1.0 million. A natural person (not an entity) whose net worth, or joint net worth with his or her spouse, at the time of purchase exceeds $1,000,000 USD. (In calculating net worth, you may include your equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Your inclusion of equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.)

2) Individual with $200,000 individual Annual Income. A natural person (not an entity) who had individual income of more than $200,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

3) Individual with $300,000 Joint Annual Income. A natural person (not an entity) who had joint income with his or her spouse in excess of $300,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

4) Corporations or Partnerships. A corporation, partnership, or similar entity that has in excess of $5 million of assets and was not formed for the specific purpose of acquiring an interest in the Corporation or Partnership.

5) Revocable Trust. A trust that is revocable by its grantors and each of whose grantors is an Accredited Investor as defined in one or more of the other categories/paragraphs numbered herein.

6) Irrevocable Trust. A trust (other than an ERISA plan) that (a)is not revocable by its grantors, (b) has in excess of $5 million of assets, (c) was not formed for the specific purpose of acquiring an interest, and (d) is directed by a person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Trust.

7) IRA or Similar Benefit Plan. An IRA, Keogh or similar benefit plan that covers only a single natural person who is an Accredited Investor, as defined in one or more of the other categories/paragraphs numbered herein.

8) Participant-Directed Employee Benefit Plan Account. A participant-directed employee benefit plan investing at the direction of, and for the account of, a participant who is an Accredited Investor, as that term is defined in one or more of the other categories/paragraphs numbered herein.

9) Other ERISA Plan. An employee benefit plan within the meaning of Title I of the ERISA Act other than a participant-directed plan with total assets in excess of $5 million or for which investment decisions (including the decision to purchase an interest) are made by a bank, registered investment adviser, savings and loan association, or insurance company.

10) Government Benefit Plan. A plan established and maintained by a state, municipality, or any agency of a state or municipality, for the benefit of its employees, with total assets in excess of $5 million.

11) Non-Profit Entity. An organization described in Section 501(c)(3) of the Internal Revenue Code, as amended, with total assets in excess of $5 million (including endowment, annuity and life income funds), as shown by the organization’s most recent audited financial statements.

12) A bank, as defined in Section 3(a)(2) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

13) A savings and loan association or similar institution, as defined in Section 3(a)(5)(A) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

14) A broker-dealer registered under the Exchange Act.

15) An insurance company, as defined in Section 2(13) of the Securities Act.

16) A “business development company,” as defined in Section 2(a)(48) of the Investment Company Act.

17) A small business investment company licensed under Section 301 (c) or (d) of the Small Business Investment Act of 1958.

18) A “private business development company” as defined in Section 202(a)(22) of the Advisers Act.

19) Executive Officer or Director. A natural person who is an executive officer, director or general partner of the Partnership or the General Partner, and is an Accredited Investor as that term is defined in one or more of the categories/paragraphs numbered herein.

20) Entity Owned Entirely By Accredited Investors. A corporation, partnership, private investment company or similar entity each of whose equity owners is a natural person who is an Accredited Investor, as that term is defined in one or more of the categories/paragraphs numbered herein.

Please read the notice above and check the box below to continue.

Singapore

168 Robinson Road,
Capital Tower, Singapore 068912
+65 3105 1295

Taiwan

5th Floor, No. 1-8, Section 5, Zhongxiao East Road, Taipei

Hong Kong

R91, 3rd Floor,
Eton Tower, 8 Hysan Ave.
Causeway Bay, Hong Kong
+852 3002 4462

Australia

44 Martin Place, Sydney 2000 Australia
+02 8319 3232

Indonesia

Millennium Centennial Center, 38th Floor, Jl. Jend. Sudirman Kav. 25
Jakarta 12920, Indonesia

Market Coverage