NIO Stock Analysis: Should You Buy in 2021?
Chinese Electric Vehicle (EV) Company NIO (NYSE: NIO) is a new player in the automotive market. The company was founded in 2014 and has made quite a splash in the electric vehicle market. NIO does not manufacture its own vehicles; instead, it partners with a state-owned automaker.
There are many reasons to be excited about NIO stocks. The company behind it manufactures electric vehicles, and countries around the world are mobilizing to support electric vehicles. The European Union wants to have at least 30 million electric vehicles on its roads by 2030. And more recently, the Biden administration in the United States has set itself an ambitious goal of 50% of electric vehicle sales by 2030.
China is the backdrop for these ambitious goals. It has become the world leader in the manufacture of electric vehicles. Statistical projects China will produce more than 13 million electric vehicles between 2018 and 2023. This is nearly triple the US projection. Even Germany, number two in the projection, is expected to produce 4.4 million electric vehicles.
All signs point to a rapidly expanding pie that companies like NIO can claim a significant share of. Of course, the potential growth of the market does not guarantee the growth of a given company, nor its share price, for that matter. Thus, we will examine the NIO share and its prospects for the future.
NIO share performance outlook
The performance of the NIO stock is a bit mixed. Yahoo! Financials, for example, is bearish on the stock for both its short- and medium-term prospects. Overall, the outlook is bearish for the electric vehicle company. And if you’re looking for other EV inventory, check out this link.
Meanwhile, the six analysts who have contributed to TipRanks see it as a solid buy. The site gives an average price target of $ 64.50 for July 2022, a 41% increase from the last price. It should be noted that the current share price is much higher than it was last year. The company went public in September 2018 and was priced below $ 10 until 2020. The price rose sharply from mid-2020; it’s not as good as it used to be.
Overall, the site gives the NIO stock a “neutral” rating using its proprietary Smart Score metric despite its analysts being bullish about it. Bloggers are also bullish on this, and hedge fund activity is on the rise. However, its technical characteristics are negative and its return on equity is -89%.
Quarterly financial data
For the most part, NIO’s quarterly financial data looks strong. In the quarter ending March 2021, its revenue was 7.98 billion yen, an increase of 482%. Although this is a huge increase in income, the company’s net loss amounted to 4.87 billion yen.
In terms of cash flow, NIO had 47 billion yen in cash and cash equivalents, which gives it more than enough to handle debt payments and grow its operations. NIO has also attracted several large investors, with more than 25 billion euros in 2020. The Chinese government has also offered 7 billion yen to the company. This is a good sign for a business that is growing at a rapid pace.
Yahoo! Financials shows bullish sentiment in its chart event, and TipRanks analysts view NIO stock as a solid buy. However, TipRanks shows that its investors have a “very negative” sentiment about NIO stocks. The majority of the members of this community sold shares of NIO rather than buying; the sector average slightly favors buying.
While NIO’s financial data is mixed, some investors are concerned lately. In particular, the actions of the Chinese government have frightened some people. Earlier in the summer, the country cut apps and halted IPOs. For its part, China says the actions are due to concerns over the collection of personal data.
NIO also has a manufacturing agreement with the state-owned automaker. This entity is called Jianghuai Automotive Group (SHA: JAC). Several NIO vehicles are manufactured by JAC, including its ES8, ES6 and EC6. NIO also has a joint partnership with JAC and Jianglai Advanced Manufacturing Technology, holding a 49% stake.
Given that a state-owned automaker produces NIO’s battery-electric vehicles (BEVs), it seems unlikely that the Chinese government will go after NIO directly. Nevertheless, the problems of the Chinese stock market worry some investors.
Should you buy NIO shares?
There are some encouraging signs for NIO, but it’s a mixed bag, as mentioned earlier. His cash flow and income have improved, but he is still losing money overall. It also has a negative return on equity.
The electric vehicle business is also facing increasing competition from other Chinese electric vehicle manufacturers. Build your dreams, also known as BYD (OTC: BYDDF) is China’s biggest seller of electric vehicles. It sold 131,000 electric vehicles in 2020 against 44,000 units for NIO. And there are even more players entering the EV market in China. These include EV startups XPeng (NYSE: XPEV) and Li Auto (Nasdaq: LI).
Of course, supply chain issues that affect the entire auto industry are a problem for NIO as well. Although this problem should eventually resolve itself, it’s something to keep in mind.
Remember, TipRanks predicts a 41% increase in the share price over the next year. But if you need to buy NIO stocks, it depends on how much you think the current game could derail its growth from. Most of its finances are moving in the right direction and the electric vehicle market has a lot of room for growth. However, this inevitably means that there will be more competition in the years to come.
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About Bob Haegele
Bob Haegele is a personal finance writer who specializes in investing and retirement planning. His heavy student loan burden inspired him to pay off his loans, and now he’s helping others get their finances in order. When he’s not writing he enjoys travel and live music.