社区

Is Nio Stock A Buy After China's Tesla Sees High Interest In New ET5 Electric Sedan?

China's Nio (NIO) continues to see robust demand for its luxury electric SUVs, while growing its lineup of electric cars and innovating EV batteries. But chip woes linger. Is Nio stock a buy right now?

At Nio Day 2021 on Dec. 18, the EV startup revealed the ET5 sedan, the fifth electric vehicle in its growing lineup. The ET 5 is a smaller counterpart to the ET7 that Nio revealed earlier this year, as well as a rival to the Tesla Model 3 in China.

The ET5, set to launch in September 2022, is Nio's most preordered electric vehicle, according to CEO William Bin Li. Analysts expect the ET5 to widen Nio's reach with a more affordable pricing and attractive styling.

Founded in 2014, Nio had little experience in vehicle manufacturing when it came on the scene. But Nio, occasionally called the Tesla of China due to its well crafted, luxury designs, went on to deliver booming sales. Unlike Tesla (TSLA), Nio does not make its own electric cars, instead partnering with a state-owned auto manufacturer.

Nio Earnings And Fundamental Analysis

On key earnings and other fundamental metrics, Nio lags. It's a young and fast-growing company, still looking to turn a profit.

(NIO)

Nio stock earns a weak EPS Rating of 44 out of 99, and an SMR Rating of D, on a scale of A to a worst E. The EPS rating compares a company's earnings growth vs. other companies. The SMR Rating is a combined measure of sales growth, profit margins and return on equity.

On Nov. 10, Nio delivered a less-than-feared loss for the third quarter. Nio lost 6 cents a share while revenue soared 117%. But the startup gave a weaker-than-expected Q4 revenue outlook, as chip shortages and production challenges continue.

Analysts expect Nio to pare losses to 62 cents per share in 2021 from 73 cents in 2020, according to FactSet. Revenue is seen surging 124% this year.

In Q3, Nio doubled EV sales, but Chinese startup rivals Li Auto (LI) and Xpeng (XPEV) nearly tripled sales. In November, Nio's EV sales rebounded after plunging 27.5% the prior month. The company cited chip-supply issues and the retooling of manufacturing lines for new EVs as the cause of the October slowdown.

Amid stiff competition, Nio is speeding up new EV launches. It aims to deliver three new products in 2022. Those include the ET7, its first electric sedan and most high-tech vehicle yet.

Nio's ET7 will offer ultra-long range and highly autonomous driving. It is set to launch in China in Q1 2022 and by end of 2022 in Europe.

Out of 24 analysts covering Nio stock, 21 rate it a buy, two have a hold and one has a sell, FactSet says.

Nio Stock Technical Analysis

U.S.-listed shares of Nio have more than halved from the January high of 66.99. Nio stock has plunged to a 52-week low. Shares are well below their 50-day and 200-day moving averages. Nio stock currently has no buy point.

Nio and other U.S.-listed Chinese stocks tumbled in early December on delisting fears. Both Beijing and Washington have made moves suggesting they could force Chinese companies off U.S. exchanges. Nio is looking to list in Hong Kong.

More broadly, Nio faces rising competition in the market for electric cars. Fellow China EV startups Li Auto (LI) and Xpeng (XPEV) are rising rivals to Nio, which has a much-higher valuation.

The relative strength line for Nio stock shows severe lag. It rallied sharply for most of 2020. A rising RS line means that a stock is outperforming the S&P 500 index. It is the blue line in the chart shown.

Shares earn a lackluster IBD Composite Rating of 43 out of 99. The rating combines key fundamental and technical metrics in a single score. A 16 RS Rating means that Nio has outperformed just 16% of all stocks over the past year.

Nio's Accumulation/Distribution Rating of D- reflects moderate selling by big investors over the past 13 weeks. As of September, 867 funds owned shares. NIO stock shows zero quarters of rising fund ownership, according to the IBD Stock Checkup tool.

How To Research Growth Stocks: This IBD Tool Simplifies The Search

China EV Competition Grows

Nio targets China's luxury market for electric cars. Besides Tesla (TSLA), its rivals there include fellow startups Li Auto and Xpeng and industry giant BYD (BYDDF), whose EV and hybrid sales have nearly tripled in the past six months.

Chinese and U.S. auto giants are pushing into the luxury EV market as well. Those companies include Geely.

In the past year, General Motors (GM), Ford (F) and Volkswagen (VWAGY) all launched electric SUVs in China, made locally for Chinese consumers.

Still, Nio continues to grow EV sales, after more than doubling them in 2020, and coming back from the brink of bankruptcy.

By 2030, fully electric and hybrid EVs will make up 90% of new car sales in China, Nio CEO William Li forecasts. That would be up from about 10% in March, suggesting ample room to grow.

Nio plans three new EVs in 2022, including the ET7 and ET5 electric sedans. The hot Chinese startup already makes three premium electric SUVs, including the ES8, ES6 and EC6.

While expanding capacity in China, Nio is growing overseas. It sells the ES8 in Norway. It plans to sell the upcoming ET7 in Norway and Germany in 2022.

At Nio Day 2021 Dec. 18, the Shanghai-based carmaker vowed to expand in Germany, the Netherlands, Sweden and Denmark next year. By 2025, Nio aims to be in 25 countries.

Chinese peers BYD and Xpeng are in Norway as well, with Li Auto also planning to enter Europe. Chinese EV makers are challenging Western automakers, including Tesla, on the continent.

Looking For The Next Big Stock Market Winners? Start With These 3 Steps

Outlook For Nio, EV Stocks

On home turf, China's Nio, Li Auto and Xpeng are expanding to fend off Tesla.

Nio SUV

Nio currently sells the ES8 and ES6 electric SUVs, and a new EC6 electric crossover. (Johnnie Rik/shutterstock.com)

Globally, EV sales are expected to rise 70% in 2021, according to IHS Markit.

But the global semiconductor shortage could foreshadow an EV battery shortage, analysts say. The chip crisis hit Nio, as well as Tesla, Volkswagen (VWAGY), General Motors (GM) and Ford (F).

Growth drivers for Nio include new and upcoming EVs. Meanwhile, battery services are key to its business model.

Nio offers an innovative subscription plan for batteries. Basically, the car and the battery are sold separately. Users can buy Nio EVs without batteries for a lower price and "rent" batteries for a monthly fee. They also can swap car batteries based on their needs.

In July, Nio announced a vast expansion of battery swap stations. It has now achieved 5.3 million battery swaps, up from 2.9 million in July. It's taken battery swaps to Norway, further challenging Tesla.

Is Nio Stock A Buy Now?

From a fundamental perspective, Nio's financial condition is improving after debt and liquidity fears slammed shares. It has significantly pared losses while delivering huge top-line gains.

An expanding vehicle lineup, entry into Europe and battery innovations mean more runway for growth. But the EV wars are heating up. In the near term, the chip supply crunch poses a headwind to Nio. Longer term, battery supplies could be an even bigger headache for EV stocks at large.

Nio stock is at a new low and does not have a current buy point. But it's a promising and high-growth EV stock, so check back for updates.

Bottom line: Nio stock is not a buy right now.