Nio Inc – (NYSE: NIO) has had a stellar year of trading, outperforming investor and analyst expectations. NIO stock has gained 623% over the past 12 months, cementing its name as one of 2020’s best performing stocks. In addition, the Chinese EV manufacturer managed to deliver over 20,000 vehicles in the first quarter of 2021. With strong delivery and revenue growth, NIO has vanquished its domestic competition, Li Auto and Xpeng. Furthermore, NIO plans to expand its production capacity with its key manufacturers to 240,000 units a year to meet the surging demand of NIO’s vehicles. With plenty to breakdown, this article will analyse everything investors need to know about NIO’s stock forecast in 2021 and beyond.
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What are analysts predicting for NIO stock over the next 12 months?
Firstly, the general consensus amongst analysts is bullish. Across the board of 18 Wallstreet analysts, the average 12 month price target is currently $51.69 a share (upside of 13% from the current trading price). However for price targets released in 2021 alone, the average sits at around $64.14 a share (40% uptrend from 2020 analyst coverage). Here are a few 12 month price targets from institutions:
Citi Group 6/1/2021 – analysts boosted the 12 month price target to $58.30 a share. The target increase came after strong delivery results in May (6,711 vehicles).
Mizuho 5/3/2021 – analyst Vijay Rakesh boosted coverage to $65 a share and a buy rating. This suggests an upside of 44% from the current trading price. The analyst noted Nio “is a leader and innovator in the premium automotive EV segment.” Furthermore, Rakesh noted to investors that Nio has the “home court advantage” in the booming Chinese EV market.
Deutsche Bank 4/27/2021 – Analyst Edison Yu from Deutsche Bank reiterated the firms target of $60 a share and a Buy rating for NIO stock in 2021/22.
HSBC 2/26/2021 – analyst Yuqian Ding boosted their 12 month price target to $54 a share representing a 22% upside from the current trading price.
1/28/2021 Morgan Stanley – analyst Jack Yeung boosted the 12 month price target from $33 to $80 a share. This new target suggests an upside potential of 82% from the current trading price. Morgan Stanley also have an Overweight rating on NIO stock, representing a strong bullish sentiment from the Wallstreet banker.
What this means for investors?
The recent consensus amongst financial institutions remains bullish with price targets now pushing above the field of $70-$80 a share. Although these targets will continue to update as we move further into 2021/22, the key snapshot suggests analysts are confident in NIO stock and a 13% upside over the next 12 months (based upon above price targets).
Strong delivery growth driving bullish sentiment
Firstly, vehicle sales in the most recent Q1 earnings were recorded at US$1.13 Billion, which was an increase of 489% YOY. The strong revenue performance has also been a result of NIO’s improving vehicle margin which now sits at 21.2%. Furthermore, vehicle deliveries for the first quarter of 2021 were recorded at 20,060 (423% YOY growth). In addition to strong Q1 deliveries, NIO delivered 7,102 vehicles in April and 6,711 vehicles in May. These results all point towards a strengthening financial position, an exciting prospect for long term shareholders.
However, the global semiconductor shortage saw NIO’s Hefei factory close for a period of 5 working days. Although deliveries are currently still strong, investors should be cautious of the shortage and its potential impact on NIO’s financial growth. It is worth noting the shortage is effecting companies across the entire Electric Vehicle and Technology sector. In saying this, investors are encouraged by the recent agreement renewal with NIO’s key manufacturers which will ramp up production in 2021.
“The overall demand for our products continues to be quite strong, but the supply chain is still facing significant challenges due to the semiconductor shortage. In light of the strong momentum under a volatile macro environment, we expect to deliver 21,000 to 22,000 vehicles in the second quarter of 2021.”said William Bin Li, founder, chairman and chief executive officer of NIO.
Revenue forecasts for 2021 and beyond
Firstly, across the board of analysts the average revenue forecast for 2021 expects the company to generate $5.35 Billion. This represents revenue growth of 110% year on year (YOY) from 2020. Furthermore, analysts expect the company to generate $8.70 Billion in 2022. The catalysts for this revenue growth over the next 2 years include NIO’s new flagship sedan, the ET7 which is expected to steal market share from Tesla’s Y model.
In addition, the fast growing demand for EV’s in China is also attributing to a positive revenue outlook. Analysts at Canalys forecast 1.9 million EVs will be sold in China in 2021. If we combine this with tumbling Tesla sales in China, we can conclude NIO has an opportunity to capture serious Chinese marketshare in 2021/22.
What’s in the pipeline for NIO stock moving into 2021/22?
NIO have recently launched the BaaS and the 100kWh battery pack with proprietary thermal management and significant performance enhancement. This enables for lower initial purchase prices of vehicles and enhanced battery performance. Morgan Stanley analyst Tim Hsiao argues, reducing the cost for the end-user “will see NIO’s incremental vehicle sales increase by 10-36% between 2021-2030”. Tim further explains that if NIO could cement themselves as the BaaS captain, then they could set the industry standards. Ultimately bolstering NIO’s brand and market share in 2021, and beyond.
In conclusion, the bullish revenue forecasts and bolstering Chinese EV market is providing positive signs for long term investors. Furthermore, NIO is showing signs of maturity with an improving vehicle margin and a positive cash flow. However, the current shortage of semi-conductors will continue to impact the entire EV industry. Therefore, it is essential that NIO can capitalise on Chinese market share by meeting the high demand for EV’s.
Written by Tyger Fitzpatrick, Founder of Youth Investment Group – For full disclosure to our viewers, the author of this article has a long term position in the stock.
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