In case any person was under the impression electric-powered automobile 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 % since the turn of season.
The company has been a key 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 counts 4 strategic milestones, the reason he thinks Nio is going to continue to trade more like a fast growth technology/EV stock compared to a carmaker.
These include the pivot out 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 brand new model – an ET7 sedan – offering 150kwh capacity or range of around 1,000km, as well as the commercialization of LiDar to deliver super sensing capability on ET7.
The majority of intriguing of all, however, will be the first of content monetization? e.g. Ad as a service.
Lai feels this opens up a complete brand new world of monetization options for car manufacturers and also suggests future cars will be as smartphones with wheels.
For Nio’s next model, the ET7 sedan, owners will be able to access a complete AD service for Rmb680 a month.
Assuming 5-7 yrs of usage, Lai says, Cumulative payment will be similar or higher compared to the one time AD option payment at Tesla or Xpeng.
In the future, Lai expects Nio will ramp up content monetization revenue in other products or services.
The analyst’s sensitivity analysis indicates such content revenue could possibly 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 gains 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 assistance amidst Lai’s colleagues, though its present valuation presents a conundrum. NIO’s Moderate Buy consensus rating is based on eight Buys and four Holds. However, the share gains keep coming in thick and fast, and the $52.28 average priced target today indicates shares will decline by ~19 % with the following 12 months.