After a strong rally in 2020, electric vehicle (EV) stocks are sliding, as most stocks in the industry are significantly underperforming the indexes year to date. However, this makes these companies an attractive contrarian bet, given the rapidly expanding EV market and the accelerated shift towards clean energy solutions.
Shares of NIO are trading 39% below record highs valuing the company at a market cap of $60.6 billion. In 2020, NIO sold around 44,000 EVs which was an increase of 113% year over year. In the first quarter of 2021, it shipped over 20,000 vehicles indicating a growth of 423% compared to the prior-year period.
Recently, NIO confirmed it renewed its partnership agreement with Jianghuai Automobile Group or JAC. The agreement was extended for another three years allowing JAC to manufacture NIO’s three SUV models as well as other vehicles in the future. JAC is a state-owned manufacturer and this agreement will allow NIO to double its capacity to 20,000 vehicles each month.
NIO currently manufactures three EV SUV models and is expected to begin the production of the ET7 luxury sedan in early 2022. In April 2021, NIO delivered 7,100 vehicles which was 125% higher compared to the year-ago period. But its deliveries were impacted by the shortage of semiconductor chips which means production numbers could be higher.
NIO is an EV giant and continues to add revenue streams and push top-line growth higher. It now offers customers a subscription service for battery swapping. The company is also looking to collaborate with auto heavyweight Ford Motors (F) to allow the latter’s Mach-E vehicles access to NIO’s charging network.
Analysts expect NIO to increase sales by 112% to $5.41 billion in 2021 and by 62.4% to $8.78 billion in 2022. While still reporting an adjusted loss, NIO’s loss per share is forecast to improve to $0.09 per share in 2022 compared to a loss of $0.73 a share in 2020.
Wall Street analysts have a 12-month average price target of $60.79 for NIO stock, which is 47% above its current trading price.
Li Auto (LI)
Shares of Li Auto are down about 50% from all-time highs despite rising over 10% in the last two trading sessions. The stock gained momentum on the back of its Q1 results. Li Auto reported sales of $545.7 million and an adjusted loss of $0.02 per share in the March quarter. Comparatively, analysts forecast the company to report sales of $522.5 million and a loss of $0.03 per share in Q1.
Li Auto said its vehicle deliveries rose over 300% year over year to 12,579 in Q1. It ended the quarter with 65 retail stores and 135 service centers. Similar to other EV manufacturers, Li Auto is also focused on expanding its manufacturing portfolio and raised $862.5 million in convertible notes in April to fund expansion plans.
In Q2 of 2021, Li Auto expects to deliver between 14,500 and 15,500 vehicles which may generate revenue between $609 million and $651 million in sales. While revenue forecast was below average consensus estimates of $704.5 million in Q2, Li Auto claimed its monthly deliveries might touch 10,000 by the end of Q3.
Analysts expect Li Auto to increase sales by 105% to $3 billion in 2021 and by 75% to $5.23 billion in 2022. This will allow Li Auto to improve its bottom-line to earnings per share of $0.1, compared to a loss of $0.28 per share in 2020.
Wall Street has a 12-month average price target of $37.65 for LI stock, which is 57% above its current trading price.
We can see NIO and Li Auto are both trading at a hefty discount to analyst estimates. Their stellar growth rates should continue over the upcoming decade, given strong growth forecasts for the EV industry.
According to a report from BloombergNEF, EV sales might touch 54 million each year by 2040, up from 26 million in 2030 and less than 2 million in 2020. Further, NIO and Li Auto derive a majority of the sales in China which is the largest EV market in the world. China is expected to account for 50% of the total EV market in 2030 and 33% by 2040.