Is NIO a Good Stock to Buy?
Throughout the dreadful pandemic ridden year of 2020, most stocks suffered brutally. However, Electric-vehicle (EV) stocks managed to make major gains by the end of the year. This happened despite the fact that many investors have become skeptical about the inflated valuations that these firms have achieved because of investor enthusiasm. And if trends are anything to go by, these EV stocks are only going to go up. When it comes to the world of electric vehicles, the first name that comes to most people’s minds, is Tesla (NASDAQ:TSLA). However, it’s the Chinese electric vehicles manufacturer NIO (NYSE:NIO) which performed the best among EV manufacturers during 2020. It outperformed Tesla significantly in the stock market. That performance has led to many investors thinking about parking their money with NIO. So if you are one of those investors and you are wondering if NIO is a good stock to buy, this post is just for you. Once you are done reading this post, you will have the answer to that question. Let’s get started.
Should you buy NIO stock?
There are a lot of factors that have driven the surge in the price of NIO stock. Here are some of the most important ones:
Investors are very enthusiastic
Tesla’s transient ascent was the subject of numerous features in the course of the most recent year, and drove speculative financial backers to look for “the next Tesla.” One clear spot to look was the biggest car market on the planet, China. As recently as the mid 2020, NIO’s business was on the verge of bankruptcy. Be that as it may, a move by the Chinese government to speed up development in the country’s EV industry led to some great investment deals and investors quickly moved in to support the firm financially.
As the stock took off, the organization additionally worked towards raising the required capital. This weakened existing investors, as can be seen from the quicker development of big business esteem contrasted with the stock cost.
Rapid development speed
While not developing as fast as the offer value itself, NIO’s business is developing quite fast. Delivery of vehicles expanded by 113% in 2020 contrasted with the earlier year. 2020 addressed practically 60% of the organization’s by and large total vehicle delivery requirements.
However, at just shy of 44,000 vehicles, that is still less than 10% of Tesla’s 2020 volume. NIO is extending its item contributions with another electric luxury car reported at the new “NIO Day” introduction. The ET7, which will be NIO’s first vehicle, accompanies another, bigger 150 kWh battery pack. With a full charge, the car can travel 621 miles, as indicated by the organization. That is farther than Tesla’s Model S most generous estimate of 402 miles. It is also more than the 517 miles claimed by Lucid Motors Air Car.
Goof market opportunity
EV deals in China outperformed 1 million in 2020, and the public authority plans to grow that to 5 million by 2025. That number could arrive at 10 million by 2030, and approach 20 million by 2040, as per research association BloombergNEF.
A rivalry is also brewing in the process. Tesla delivered its first Model Y SUV from its Shanghai industrial facility in 2021. Other Chinese EV organizations are likewise developing deals at triple-digit rates, so NIO is a long way from being the pioneer in the country. Warren Buffett-upheld BYD (OTC:BYDDY) sold right around 131,000 battery-electric vehicles (BEVs) in 2020, and in excess of 460,000 vehicles overall.
There is obviously more space for outstanding vehicle deals development in the coming years, and NIO’s ET7 shows the organization plans. NIO is likewise improving with a battery trade program that permits clients to “re-energize” by means of a quicker battery trade. The organization says its robotized battery trade stations require just three minutes for a completely stocked and charged battery substitution.
Will the NIO stock follow?
As it is with other EV brands like Tesla, investors for NIO also have to struggle with the matter of the stock’s true valuation. NIO’s absolute 2020 income was around $2.5 billion.
However, even though the revenue seems high, the organization presently can’t seem to generate any profit. So taking a gander at a cost to-deals proportion is a superior method to assess valuation. With a current market capitalization drawing closer to $100 billion, NIO traded multiple times at very nearly multiple times 2020 deals, and what is assessed to be around multiple times 2021 deals.
By that measurement, NIO is valued higher than Tesla. Considering the opposition and vulnerability looking forward, there is more risk than potential gain right now in NIO stock.
Financial backers are wagering on the enormous market potential for EV development. In the event that everything goes ideal for NIO, the prices can rise rapidly. In any case, in the event that you add it to a portfolio today, you ought to be ready for some massive risks as well. That is the meaning of a theoretical speculation.
At some point, soaring output of electric cars might end up eclipsing the demand for them. This will lead to a drop in prices and sales. For EV stocks, supplies of batteries and battery metals are another issue. A rise in the price of battery materials could lead to a stop in the battery prices as well.
“We remain very concerned about the potential for battery cell supply shortages that may make many of today’s short-term OEM volume targets difficult to make good on,” Morgan Stanley analyst Adam Jonas wrote in a note to clients April 5.
Is NIO Stock A Buy Now?
From a fundamental perspective, NIO’s financial condition is on the way up after the shares plummeted because of debt and liquidity fears. NIO is paring losses while delivering huge top-line growth.
From a technical perspective, NIO is currently in the bear market. A new pattern or buy point might take some time to emerge. Its RS line is lagging after a strong rally last year. However, it did have a recent rebound off an important support level, and that’s a promising sign. In conclusion, you shouldn’t buy NIO stock right now.