If any person was under the impression electric car 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 now up by 31 % after the turn of season.
The company has been a major beneficiary of the current trend for both EV makers as well as development stocks. Sticking to the recent annual Nio Day event, J.P. Morgan analyst Nick Lai matters four strategic milestones, why he feels Nio will continue to swap 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) solution based on Nvidia architecture. A solid state battery for the next new model – an ET7 sedan – boasting 150kwh capacity or maybe range of over 1,000km, along with the commercialization of LiDar to provide super-sensing capability on ET7.
Many intriguing of all, however, will be the beginning of content monetization? e.g. Ad as a service.
Lai thinks this opens up a complete new world of monetization choices for automobile makers and suggests succeeding cars will be as smartphones with wheels.
For Nio’s next design, the ET7 sedan, owners will be ready to access a full AD service for Rmb680 a month.
Assuming 5 7 years of usage, Lai states, Cumulative payment would be higher or similar than the one time AD option payment at Tesla or Xpeng.
Down the road, Lai expects Nio will ramp up content monetization revenue in various goods and services.
The analyst’s awareness evaluation suggests such content revenue could increase rapidly from 2022, implying accretion of equity present value of ~US$21-35/shr.
Accordingly, Lai reiterates a heavy (i.e. Buy) rating on NIO shares and bumped the price objective up from fifty dolars to a block high of $75. Investors may be pocketing gains of 18 %, really should Lai’s thesis play out with the coming months. (In order to watch Lai’s track record, click here)
Nio has decent support amidst Lai’s colleagues, though the present valuation of its offers a conundrum. NIO’s Moderate Buy consensus rating is based on eight Buys and four Holds. Nevertheless, the share gains keep coming in heavy and fast, and the $52.28 usual price target now suggests shares will drop by ~19 % over the next 12 months.