June 28, 2022

In case any person was under the impression electric automobile stocks would pause for a breather following 2020’s blistering rise, they forgot to hand Nio (NIO) the memo. The Chinese EV maker has seamlessly advanced into 2021, with shares already up by thirty one % since the turn of season.

The company has been a key beneficiary of the present trend for both EV manufacturers as well as development stocks. Following the recent annual Nio Day event, J.P. Morgan analyst Nick Lai counts 4 strategic milestones, the reason he thinks Nio is going to continue to swap more like a fast growth technology/EV stock than a carmaker.

These include the pivot out from the existing products’ Mobileye EQ4 resolution to an in house autonomous driving (AD) solution based on Nvidia architecture. A solid-state battery for the next new model – an ET7 sedan – boasting 150kwh capacity or perhaps range of over 1,000km, as well as the commercialization of LiDar to provide super-sensing capability on ET7.

Most fascinating of all the, nonetheless, may be the first of content monetization? e.g. Ad as a service.

Lai feels this opens up a whole new world of monetization choices for automobile makers and suggests future automobiles will be like smartphones with wheels.

For Nio’s next design, the ET7 sedan, owners are going to be ready to access a full AD service for Rmb680 a month.

Assuming 5-7 yrs of usage, Lai states, Cumulative transaction would be higher or similar than the one-time AD choice payment at Xpeng or Tesla.

Down the road, Lai expects Nio will ramp up content monetization revenue in various goods and services.

The analyst’s sensitivity analysis suggests some content revenue could possibly increase rapidly from 2022, implying accretion of equity present value of ~US$21 35/shr.

Appropriately, Lai reiterates an overweight (i.e. Buy) rating on NIO shares and bumped the price objective up from $50 to a neighborhood high of seventy five dolars. Investors could be pocketing profits of 18 %, really should Lai’s thesis play out over the coming months. (To watch Lai’s track record, click here)

Nio has decent assistance amongst Lai’s colleagues, though its current valuation provides a conundrum. NIO’s Moderate Buy consensus rating is actually based on eight Buys and 4 Holds. Nonetheless, the share gains keep coming in thick and fast, as well as the $52.28 usual priced target now indicates shares will decline by ~19 % over the next twelve months.