Picture supply: Sam Robson, The Motley Idiot UK
What a few months it has been for electrical automobile maker NIO (NYSE: NIO). NIO inventory has leapt 53% over the previous two months.
That’s the stuff of investor desires, though in equity it nonetheless leaves NIO 91% under its 2021 excessive.
From a long-term perspective, although, I might additionally level to the five-year share value efficiency. Throughout that interval, NIO inventory is up 271%.
Right here I need to dig into what has been happening with the share value — and whether or not it could sign a turnaround for the share value that might justify shopping for NIO for my portfolio.
Huge gross sales development
The important thing set off for the surge in NIO inventory, so far as I’m involved, was the quarterly outcomes assertion it launched final month.
Automobile deliveries through the quarter have been over 57,000. That represented 144% development in comparison with the identical interval the prior 12 months.
I see that as excellent news in two methods.
First, the expansion is spectacular. It means that NIO has established an more and more credible place with no less than some prospects in what’s a aggressive market. Secondly, in absolute phrases, I believe the gross sales figures are respectable.
Certain, they’re a good distance behind rival Tesla. In its newest quarter, it delivered 463,000 automobiles. NIO’s deliveries have been underneath one-eighth of Tesla’s. However they nonetheless equated to over 4,000 automobiles per week on common. I see that as substantial.
I believe the gross sales volumes are vital – and assist clarify the latest surge in NIO inventory – as a result of automobile manufacturing and distribution is a recreation of scale. There are giant fastened prices, so ramping up quantity is essential for spreading these prices.
NIO has strengths – however weaknesses too
Thus far, so good.
NIO is constructing a buyer base. It has confirmed that its automobiles, which aren’t low cost, can entice prospects at scale. It additionally has plenty of aggressive benefits, together with its proprietary battery swapping expertise. I see that as resolving a key grievance many individuals have about rival electrical automobiles, particularly their restricted vary.
Nonetheless, it has but to show that it might flip that constructive gross sales momentum right into a revenue.
Sure, its web loss in the newest quarter was 17% decrease than within the prior 12 months interval. But it surely nonetheless got here in at over half a billion kilos. That’s some huge cash, in my opinion.
To evaluate whether or not or not NIO inventory is attractively valued, I contemplate its long-term monetary outlook. However as I see it, a key piece of the puzzle remains to be lacking. NIO has but to show that it may be worthwhile, not to mention persistently so.
Tesla additionally made losses for a few years earlier than breaking into the black. The identical might but change into the case for NIO. But it surely faces dangers together with a really aggressive market and an unsure geopolitical local weather that might hamper the Chinese language firm’s worldwide enlargement plans.
For now, given these dangers, I don’t plan to speculate.
