Price of $ 80 would push Nio to become third largest automaker

As I prepare my last article on Nio (NYSE:NIO), Chinese electric vehicle (EV) maker Nio is trading at $ 60. This values ​​the company at $ 93.6 billion, which is good for the fifth place among the world’s largest automakers by market capitalization.

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On February 1, Deutsche Bank analyst Edison Yu reiterated his “purchase” rating and target price of $ 70. By achieving Yu’s goal, Nio could become the world’s third largest automaker.

here’s why Volkswagen (OTCMKTS:VWAGY) and WORLD (OTCMKTS:I GO) should look in their mirrors.

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A lot has changed for Nio Stock over the past year

About 15 months ago, I didn’t have much to say about the upstart electric vehicle maker:

“Like Taulli [InvestorPlace contributor Tom Taulli] points out that with the company burning cash at such a rate, any future equity or debt financing deal will be very one-sided for the entity providing the lifeline and terrible for the current shareholders.

“Nio Z Altman Score, a predictor of future bankruptcy, is -4.45 at this time. This is far from what it takes to give investors a warm and fuzzy feeling.

“I would have liked to have had better news for the shareholders of Nio stock. But you can’t put lipstick on a pig.

Of course, with hindsight, we know that Nio hung on $ 1 billion in critical funding less than five months later, and the rest is history. Forever this will be known as the turning point of the business.

So in June 2020, I went completely from skeptical to enthusiastic, suggesting that a double-digit share price by year-end was totally realistic. He finished 2020, barely $ 50.

It’s amazing what a billion dollars will do for your confidence.

A 17% gain puts Nio at or near third place

Based on the analyst’s 12-month target price of $ 70, the Nio share price only needs to appreciate by 17% over the next year to reach the target. As it grows, it looks like a slam dunk.

The story continues

Nio recently announced continued collaboration with the Hefei municipal government, the same people who saved the company from its April 2020 crash. As part of this collaboration, the Hefei government plans to reinvest the returns from its equity investment in Nio to further support production of VE in the city.

Hefei is working to make the city a hotspot for all things electric vehicles. As part of this expansion, the city will build the Hefei Xinqiao Intelligent Electric Vehicle Industrial Park. Above all, Nio plans to use this park as a base to build its global growth. Yu said:

“This lays the foundation for capacity expansion to help NIO meet its longer term volume target of +300,000 or nearly 3 times its current capacity. No details were provided on sources of funding, but we believe there will be significant support in the form of bank lines of credit or agreements of a similar nature. “

A little bit of success and lenders are falling all over the place to get in on the action.

What’s the old saying? A banker will always give you an umbrella when the sun is shining and there is no cloud in the sky.

Either way, a stock price of $ 70 puts Nio’s market cap at $ 109 billion, roughly the same value as BYD’s current market cap.

However, I think it’s fair to say that if Nio grows over the next 12 months, BYD and Volkswagen, not too far behind at $ 107 billion, should do so as well.

You have to go to $ 80 or more to grab third place

Based on 1.56 billion shares outstanding, a price of $ 80 around the same time next year puts its market cap at $ 125 billion, giving it some breathing space from its two peers.

Can he do it? I think he can gain 34% over the next 12 months to hit the magic number. Here’s how.

In 2020, Nio delivered 43,728 vehicles. Based on its current market capitalization of $ 93.6 billion, that works out to $ 2.14 million per vehicle delivered. In 2019, he delivered 20,565 vehicles. This has 831.9 million shares exceptional at December 31, 2019 and a $ 3.72 share price. This represents $ 150,482 per vehicle delivered.

I’m going to assume that Nio is once again doubling its deliveries in 2021. So, based on $ 93.6 billion, that works out to $ 1.07 million for each of the 87,456 estimated vehicle deliveries in 2021.

However, Nio might have a fourth vehicle, the EE7 sedan, in production in the fourth quarter, certainly adding to those numbers. In addition, he has a fifth vehicle on the drawing board for 2022.

So based on $ 1.07 million per vehicle delivered, it will need to deliver 116,822 vehicles in 2021. While it is possible, I think it goes in the direction. Assuming a vehicle delivery number roughly midway between $ 87,456-113636 and $ 1.65 million per vehicle delivered [halfway between $1.1 million and $2.2 million] and we deliver 100,546 vehicles at $ 1.65 million for a market cap of $ 166 billion or $ 106.40 per share [1.56 billion outstanding].

Can’t believe I’m saying this, but I think he has a great chance to blow through Yu’s target on his way to third place in the world pecking order.

In the long run, Nio is a buy.

As of the publication date, Will Ashworth does not hold (neither directly nor indirectly) any position in any of the securities mentioned in this article.

Will Ashworth has been writing about investing full time since 2008. His publications include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and several others in the United States and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. As of this writing, Will Ashworth does not hold a position in any of the aforementioned securities.

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