Compared to TSLA, NIO Stock Is Attractively Valued, Says Analyst

[Bong Hwan Ahn]

Compared to TSLA, NIO Stock Is Attractively Valued, Says Analyst

TipRanks

Wed, January 25, 2023 at 8:04 PM EST

There’s not much arguing on the matter anymore with most agreeing that the future of the auto industry lies with electric vehicles (EVs).

Between 2022 and 2030, Mizuho analyst Vijay Rakesh projects BEV (battery electric vehicles) sales will grow at a CAGR (compound annual growth rate) of 22% globally and could be “resilient to macro risks from higher interest rates as the overall commercialization runway remains secular.”

Right now, China is the segment leader, representing roughly 64% of all BEV sales with Europe behind at 19% while the US claims a 10% cut.

And it is for one of the big Chinese players that Rakesh has high hopes this year. “We see Nio (NYSE:NIO) well-positioned as a leading premium EV player in China, the largest EV market globally,” said the 5-star analyst. “We believe NIO differentiates itself with its proprietary battery-as-a-service (BaaS) swapping program, which could see tailwinds as it expands into Europe, the second largest EV market.”

There are catalysts ahead to look forward to; At least two new models (the EC7 and ES8) are launching this year –  deliveries for the new EC7 are slated to kick off in May, followed by deliveries of the ES8 in June - and come in the wake of the recently released ET7 and ET5, both of which are “ramping well.”

Rakesh also believes the end of the zero-Covid policies in China “could spur spending and help drive better than expected demand in 2023.”

Rakesh does note some “key risks” to NIO’s expansion plans. These include growing competition, as traditional premium automakers get in on the action and bring to market new models. Then there’s Tesla, which still leads the way in terms of volume and charging infrastructure.

On a positive note, Tesla also pops up when Rakesh considers NIo’s valuation in relation to the EV leader. “We continue to see NIO differentiated with its BaaS model, and at a >60% discount when compared to TSLA at ~2.5x C24E P/Sales, makes it attractively valued, in our view,” he summed up.

To this end, Rakesh rates NIO shares a Buy to go alongside a $28 price target. That figure makes room for one-year gains of a hefty 140%. (To watch Rakesh’s track record, click here)

Looking at the consensus breakdown, based on 11 Buys against 4 Holds, the analysts’ view is that this stock is a Moderate Buy. Going by the $16.62 target, the shares will be changing hands for a 42% premium a year from now. (See Nio stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.