Nio Inc. 6,86 -0,30 -4,19% is an EV auto manufacturer which was founded in China in 2014 by Bin Li, which was the chairman of Bitauto and NextEV. Many large technology firms, Chinese state companies and venture capitalists invested in the company, among them Lenovo, Baidu, Tencent and Sequoia. At the time of writing a NIO share costs 12.20 USD. The main market for NIO up to now has been China, where they sell their NIO ES8 for 96.860 USD while a Tesla model X costs over 110.000 USD. But it also is planning to go global and has offices in Munich, London and San Jose.
NIO, just like Tesla and other EV companies, have seen a dramatic increase in share price; from 3.78 USD to 12.20 USD now, in 6 months only, that is more than 300% growth! Next to that, it has a RSI of 78, this means that it is a rather overbought share. Combined it means that it probably is an overvalued share price. NIO has a 15.4 billion USD market capitalization, so it is a rather small player in the auto manufacturers industry. The company has a loss of more than 11 billion USD. It had revenues of over 2 billion USD in 2019 and has sold around 10.000 cars in 2020 worldwide, predominantly in China. This is far less than Tesla which has sold more than 10.000 model 3’s in May 2020 alone. NIO has a beta of 2.39, this means that it is very volatile compared to the NYSE. There are no financial ratios available as it still makes huge losses. So it is important to look at the management and the idea itself: is it feasible and growable?
First of all it is good to know that to date there are around 400 (!) other EV car manufacturers active in China. NEO is different in the sense that besides being an auto manufacturer it is also a lifestyle company: it also operates community spaces called ‘NIO houses’ and even a clothing brand. It also has many additional services for its buyers that other EV start-ups don’t feature, such as a portable power charger service, with around 950 vehicles in 95 cities in China and an easy to build battery swap station.
Looking at the management, 5 out of the 6 members have a lot of experience in the auto manufacturing industry and many also have experience with EV vehicles, having filled a high rank in companies such as Volvo and Polestar. So, the knowledge on how to run a good auto manufacturer is there.
So in conclusion, looking at NIO Inc. it still makes a lot of losses and there are few ratios making it difficult to value NIO correctly. However, looking at the bigger picture, it is not a company such as NKLA, where there is mainly a business plan without any production cars ready for the market as they already have sold around 20.000 cars this year and last year. Next to that, the company also already operate the NIO houses successfully and, according to the company itself, already made more than 500.000 battery swaps. It also has already 950 people working for their portable charging service. However, it is still a niche player in the auto manufacturer market. On the other hand, NIO has a very experienced management team, many of whom had high ranking positions at big car manufacturers. NIO could definitely become something in the long term, however the price of around 12 USD per share is way too high for the current true value. Personally, I am going to wait until it is around 6 to 10 USD per share before I buy.
Max Ritt has over 4 years experience with trading and analyzing ETFs and shares. He predicted the economic implications of the election of president Trump and the BREXIT well ahead of others. Recently he started the MaxRitt.nl webpage where he blogs mainly about investing.
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