If anyone was under the impression electric-powered 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 already up by thirty one % since the turn of season.
The company continues to be a prime beneficiary of the present trend for both EV makers as well as growth stocks. Following the latest annual Nio Day event, J.P. Morgan analyst Nick Lai matters four strategic milestones, the reason he feels Nio is going to continue to trade more like a fast-growth technology/EV stock than a carmaker.
These include the pivot away from the existing products’ Mobileye EQ4 solution to an in house autonomous driving (AD) answer based on Nvidia architecture. A solid-state battery for the next new model – an ET7 sedan – offering 150kwh capacity or perhaps range of around 1,000km, and the commercialization of LiDar to deliver super sensing capability on ET7.
Many fascinating of the, however, will be the first of content monetization? e.g. Advertisement as a service.
Lai believes this opens up a complete new world of monetization possibilities for car makers and suggests future cars will be as smartphones with wheels.
For Nio’s next model, the ET7 sedan, owners will be able to access a total AD service for Rmb680 a month.
Assuming 5-7 years of usage, Lai says, Cumulative transaction will be higher or similar than the one-time AD option payment at Xpeng or Tesla.
In the future, Lai expects Nio will ramp up content monetization revenue in other products or services.
The analyst’s awareness analysis suggests such content revenue could increase quickly 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 price target up from $50 to a neighborhood high of $75. Investors could be pocketing gains of 18 %, ought to Lai’s thesis play out over the coming months. (To view Lai’s track record, click here)
Nio has decent assistance amidst Lai’s colleagues, although its present valuation presents a conundrum. NIO’s Moderate Buy consensus rating is based on eight Buys and four Holds. Nevertheless, the share gains keep coming in thick and fast, and the $52.28 typical priced target today indicates shares will decline by ~19 % over the next 12 months.