If any person was under the impression electric 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 now up by thirty one % after the turn of year.
The company has long been a major beneficiary of the present trend for both EV manufacturers and development stocks. Following the latest annual Nio Day event, J.P. Morgan analyst Nick Lai counts 4 strategic milestones, why he feels Nio is going to continue to swap a lot more like a fast growth technology/EV stock compared to a carmaker.
These include the pivot away from the existing products’ Mobileye EQ4 answer 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 range of around 1,000km, as well as the commercialization of LiDar to deliver super-sensing capability on ET7.
Most fascinating of the, however, would be the first of content monetization? e.g. Advertisement as a service.
Lai believes this opens up a whole brand new world of monetization choices for car manufacturers and suggests succeeding cars will be as smartphones with wheels.
For Nio’s next model, the ET7 sedan, owners are going to be able to access a total AD service for Rmb680 a month.
Assuming 5-7 years of usage, Lai states, Cumulative transaction will be higher or similar than the one-time AD choice payment at Xpeng or Tesla.
Down the road, Lai expects Nio will ramp up content monetization revenue in other 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.
Accordingly, Lai reiterates a heavy (i.e. Buy) rating on NIO shares and bumped the retail price target up from $50 to a street high of seventy five dolars. Investors could be pocketing profits of 18 %, really should Lai’s thesis play through with the coming months. (In order to view Lai’s track record, click here)
Nio has good support amongst Lai’s colleagues, although the current valuation of its presents 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 also the $52.28 usual price target today suggests shares will decline by ~19 % with the following 12 months.