NIO Inc: China’s Tesla Trades at Just $4.89 Apiece

NIO Inc A Strong Stock Available From China’s Tesla
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Could This $4.89 Stock Become the Next Tesla?

With a growing number of electric vehicles (EVs) on the road, early investors in the EV industry have made some serious profits.

Take Tesla Inc (NASDAQ:TSLA), for instance. When the company introduced its “Model S” electric sedan back in June 2012, TSLA shares were trading around $33.00 apiece. Today, the stock is at $241.56, meaning those who invested in Tesla Inc back then have earned a jaw-dropping return of 632%.

But not everyone managed to get on the profit train early enough. And like many stocks that have shot through the roof, Tesla shares have experienced some pullbacks. As a matter of fact, while the company’s current share price represents a huge gain for early investors, it’s actually down more than $100.00 compared to five months ago.

So, are there any other EV companies that have the potential to make it big?

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Well, NIO Inc (NYSE:NIO) could be a good candidate.

With a share price of $4.89, NIO Inc isn’t really a soaring stock. In fact, $4.89 is actually below the company’s initial public offering (IPO) price. When NIO Inc started trading on the New York Stock Exchange (NYSE) last September, it was priced at $6.25 per share in its IPO.

Still, NIO Inc does have a good story to tell.

NIO Inc, a Chinese EV Maker

You see, while many U.S. investors have never heard of the company, NIO Inc is sometimes referred to as “China’s Tesla.” It was founded five years ago and is backed by some big-name investors, including Tencent Holdings Ltd (OTCMKTS:TCEHY, HKG:0700), Sequoia Capital, Hillhouse Capital Group, and Baillie Gifford.

One of the biggest trends in the Chinese automotive marketplace is consumers’ increasing fondness toward SUVs. And NIO Inc was right there to capitalize on that trend. In June 2018, the company started producing the “NIO ES8,” a full-size electric SUV with a seven-passenger seating capacity.

NIO is targeting the premium EV market in China, and its ES8 starts at around $70,000. Nonetheless, the model has been selling quite well.

In the second quarter of 2018, when NIO first started producing the ES8, the company delivered 100 vehicles. In the third quarter, deliveries of the ES8 quickly grew to 3,268 units. (Source: “NIO Inc. Reports Unaudited Third Quarter 2018 Financial Results,” NIO Inc, November 6, 2018.)

Then, in the fourth quarter of 2018, NIO Inc delivered a whopping 7,980 units of the ES8, marking a 144.2% increase sequentially. (Source: “NIO Inc. Reports Unaudited Fourth Quarter and Full Year 2018 Financial Results,” NIO Inc, March 5, 2019.)

Selling more vehicles means more revenue for the EV manufacturer. In the fourth quarter of 2018, NIO Inc generated $499.7 million in total revenue, representing an impressive 133.8% increase from the third quarter.

The company also achieved a positive vehicle margin of 3.7%, a solid improvement from the negative-4.3% in the previous quarter.

Last month, the company provided ES8 delivery numbers for the first quarter of 2019: 3,989 units. (Source: “NIO Inc. Provides First Quarter 2019 Delivery Update,” NIO Inc, April 2, 2019.)

That number represented a decline quarter-over-quarter, but keep in mind that the first quarter included the Chinese New Year holiday, a time when business tends to be slow and automobile license plate registration offices are closed. Also, the figure exceeded the company’s prior delivery guidance range of 3,500 to 3,800 vehicles.

Something to Look Forward To

Going forward, NIO stock could get a major catalyst: a new electric SUV.

In December 2018, the company launched the “NIO ES6,” a five-seat, mid-sized electric SUV with a range of up to 317 miles. It boasts high performance, with 0-to-62-mph acceleration coming in at just 4.7 seconds. (Source: “NIO ES6 Launches at Pre-subsidy Price Starting from 358,000 RMB with NEDC Range of up to 510 Kilometers,” NIO Inc, December 17, 2018.)

The company’s new five-seater is going to be cheaper than the full-size ES8. NIO said that the ES6 will start from 358,000 RMB (around $53,200). Deliveries of the ES6 is expected to begin in June.

NIO Inc Stock Chart

As you can see from the below chart, NIO stock hasn’t exactly been a hot commodity recently. Year-to-date, shares of the Chinese EV maker have plunged 23.2%.

Chart courtesy of StockCharts.com

Analyst Take

Compared to the stocks of other fast-growing businesses, NIO’s $4.89 share price can look attractive. However, picking up NIO stock on the cheap still has risks. While the company has a growing business and an upcoming vehicle that could turn out to be a hot seller, it is not profitable yet. In the fourth quarter, NIO Inc’s net loss widened by 24.6% from the third quarter to $509.5 million.

I wouldn’t call NIO Inc a slam dunk, but for investors who want to make a buck from the booming EV industry, NIO stock deserves a spot on their watch list.