This Analyst Finds ‘Everything’ He Ever Wanted in NIO Stock

Stock Market

Chinese electric-vehicle maker NIO (NIO) held its long awaited “Nio Day 2021” over the weekend, and at least one analyst came away impressed. Very impressed.

In a short note, reiterating his “buy” rating, Deutsche Bank analyst Edison Yu upped his price target on Nio stock by 40%, from $50 to $70 a share — less than two months after hiking that same target more than 50% to get to $50. (To watch Yu’s track record, click here)

So how did Nio wow Yu? To steal a phrase, it blinded him with science — and whiz-bang technology, and then supplemented the science with some impressive financial statistics. Here’s just a short list of a few of the things Nio revealed over the weekend:

  • A new flagship sedan — the ET7 — to move the company past its existing portfolio of electric SUVs and into the class of luxury sedans, capable of accelerating from 0 to 60 in 3.9 seconds.
  • A New 150 kWh battery pack to power the ET7.
  • “Solid-state” battery technology that packs more electrons into ET7’s 3.06 meter wheelbase, resulting in a jaw-dropping range of as much as 620 miles between charges.
  • And an “autonomy platform” featuring “4 Nvidia Orin chips … 11 8MP cameras, and a 1550 nm LiDAR from Innovusion, aiming to deliver L4 functionality in 2022,” the car to see 500 meters out in a 120 degree arc.

For what it’s worth, Yu says ET7’s processors will boast seven times more processing computing power than Tesla’s full-self driving system.

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On the financial side of things, Yu notes that there’s a market for about 300,000 electric cars annually in ET7’s class. Multiply that by a starting price of about $68,000, and Nio is targeting a total addressable market perhaps $20.4 billion big. Sales through the first three quarters of 2020, for context, were just $1.4 billion.

Supplementing revenues derived from outright sales, Yu notes that Nio is planning to sell the software to operate the company on a subscription basis, with levels of autonomy up to L2 coming included in the purchase cost, but drivers who want L3 to L4 levels of autonomy (so just short of L5 full autonomous driving) will need to subscribe for this at a cost of about $105 per month. Over a 10-year service lifetime, therefore, we’re talking about $12,600 in additional revenue per car sold.

Granted, a lot of these numbers are still a ways off in the future. Sales of the ET7 won’t begin for another year for example — Q1 2022. L4 functional autonomy won’t be available until sometime in 2022. And even the solid state battery won’t enter production until Q4 2022 — suggesting that early models of the ET7 may fall short of the range boasted of on Nio Day.

But even so, after Nio promised to provide just about “everything” an EV car shopper could ask for in the ET7, Yu seems to have decided it would seem ungrateful not to give a price target hike in return — and upped his valuation to 11 times Nio’s projected 2023 sales.

Turning now to the rest of the Street, investors are presented with a conundrum. On the one hand, based on 7 Buy ratings and 5 Holds, the stock has a Moderate Buy consensus rating. However, the analysts expect shares to fall 8.5% as indicated by the $57.61 average price target. (See NIO stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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