3 Reasons NIO, 'China's Tesla,' Should Be On Your Radar
In case you've never heard of it, NIO Inc. (NYSE:NIO) is a Shanghai-based automobile manufacturer specializing in designing and developing electric autonomous vehicles. The company, which has been dubbed the 'Tesla of China', was founded four years ago and listed on the New York Stock Exchange this past September, raising $1.8 billion.
It currently offers two main models, the ES6, which is a five-passenger SUV with a 358,000 yuan, or $52,000 price tag, and the ES8, which is an upscale, seven-passenger, three-row SUV positioned as a domestic Chinese alternative to Tesla's (NASDAQ:TSLA) Model X. It's priced at 448,000 yuan, or around $65,000 versus the Model X's sticker price of $113,000.
NIO's third model, the EP9, is an electric-powered, two-seater sports car, which the company claims is one of the world's fastest electric cars. Its 1,360-horsepower engine propels it to 160 mph in 7.1 seconds. Only six have been sold so far for a hefty $1.2 million apiece.
Besides the incredible upside for the entire electric vehicle industry, thus for the company as well, there are three additional reasons which we believe makes this stock something that should be on every investor's radar.
1. Accelerating Sales in China
NIO delivered a total of 11,348 vehicles in 2018, over-fulfilling their respective sales targets, among which 3,318 units were handed over in December alone.
NEV Completion Rate 2018
NEV Completion Rate 2018
The company is already outselling Tesla (NASDAQ:TSLA) in China by a wide margin, as the U.S. electric automaker has struggled under trade war tariffs, which have driven up the price of its Model X SUV and Model 3 Sedan.
Tesla vs NIO
Tesla vs NIO
China is the world's largest and fast-growing market for new-energy vehicles (NEVs), a category comprising electric battery cars and plug-in electric hybrids. China’s NEV sales shot up 61.7% year-on-year to 1.256 million units in 2018, according to sales data released by the China Association of Automobile Manufacturers (CAAM).
Looking beyond China, NIO has ambitions to expand into Europe and the U.S. in the next two to three years, according to Jack Cheng, one of the founders of NIO and now the CEO of XPT, NIO’s powertrain division. He says it's:
“The first vehicle to market to the European standard already so we will be able to take a step into Europe. Then we can begin moving into the U.S. because it is a more critical market.”
2. Big-Time Investor Backing
The buzz about NIO increased following reports that U.K. investment management firm and Tesla investor Baillie Gifford acquired an 11.4% stake in the Chinese company on Oct. 9. The firm owns 85.3 million NIO shares, the company said in a filing with the U.S.'s Securities and Exchange Commission.
The news made some serious waves. Baillie Gifford is Tesla's largest outside shareholder, with a 9% stake. Tesla's largest investor, founder and CEO Elon Musk, owns about 20% of shares.
Investment advisory firm Vanguard and Morgan Stanley (NYSE:MS) also disclosed that they purchased 19 million and 12 million shares respectively of NIO during the most recent quarter. Other prominent investors include China's Tencent Holdings (OTC:TCEHY), tech company Baidu (NASDAQ:BIDU), privately-held Singaporean holding company Temasek, Chinese tech company Lenovo (OTC:LNVGF) and Sequoia Capital.
Additionally, notorious short-seller Andrew Left of Citron Research published a lengthy thesis on NIO and made the long case for shares to rally to $12. They're currently trading at $7.44 as of yesterday's close.
"Just like Tesla was not a simple U.S. electric car story, NIO is so much more than just a Chinese electric car story. NIO’s visionary management is revolutionizing the high-end auto industry in China," he wrote in a note on Nov. 19. According to Citron, the Chinese EV automaker is "not just a car company," but "a lifestyle and a brand that is ready to disrupt."
3. Bullish Technical Picture
Since shares began trading on Sept. 12, the stock hit a high of $13.80 and a low of $5.62. At yesterday's closing price, that represents a gain of around 19.4% from its IPO price of $6.00.
From a technical standpoint, the stock broke above key resistance near the $8.30 level on Feb. 6, before pulling back in a constructive manner, towards its 50-day moving average at around $7. The stock needs to hold this level before successfully retesting its recent breakout price.
NIO chart
NIO next reports earnings on Wednesday, Feb. 27 before the bell. Revenue is expected to total $2.91 billion, skyrocketing from sales of $1.47 billion in the preceding quarter.
