If anybody 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 already up by 31 % after the turn of year.
The company continues to be a key beneficiary of the present trend for both EV makers and growth stocks. Sticking to the latest annual Nio Day event, J.P. Morgan analyst Nick Lai matters 4 strategic milestones, why he feels Nio is going to continue to swap a lot more like a fast-growth technology/EV stock than a carmaker.
These include the pivot away from the existing products’ Mobileye EQ4 answer to an in-house autonomous driving (AD) answer based on Nvidia architecture. A solid-state battery for the following new model – an ET7 sedan – boasting 150kwh capacity or perhaps range of over 1,000km, as well as the commercialization of LiDar to provide super-sensing capability on ET7.
Most fascinating of the, nevertheless, will be the beginning of content monetization? e.g. Advertisement as a service.
Lai feels this opens up a complete brand new world of monetization options for automobile manufacturers and also suggests future automobiles will be like smartphones with wheels.
For Nio’s next model, the ET7 sedan, owners are going to be able to get into a total AD service for Rmb680 a month.
Assuming 5-7 years of use, Lai states, Cumulative payment will be higher or similar compared to the one-time AD option payment at Xpeng or Tesla.
In the future, Lai expects Nio will ramp up content monetization revenue in different products or services.
The analyst’s sensitivity analysis indicates some content revenue might increase rapidly from 2022, implying accretion of equity present value of ~US$21-35/shr.
Appropriately, Lai reiterates a heavy (i.e. Buy) rating on NIO shares and bumped the cost goal up from fifty dolars to a block high of $75. Investors could be pocketing profits of eighteen %, ought to Lai’s thesis play out over the coming months. (To watch Lai’s track record, click here)
Nio has good support amidst Lai’s colleagues, but the current valuation of its offers a conundrum. NIO’s Moderate Buy consensus rating is actually based on eight Buys and four Holds. Nonetheless, the share gains keep coming in thick and fast, as well as the $52.28 average priced target today suggests shares will drop by ~19 % with the next 12 months.