There’s understandably been some concern as of late about Nio (NYSE:NIO) due to the worldwide semiconductor scarcity. And people fears have been amplified late final month when the electrical automobile (EV) firm introduced it could droop automobile manufacturing for 5 days. Does that imply NIO inventory’s days as a high-flying development inventory are coming to an finish?
By no means.
The truth is, Nio made a follow-up announcement this month that provides bullish buyers cause to have fun. As a result of regardless of the aforementioned semiconductor scarcity, Nio is producing extra EVs than ever.
I count on that development to proceed, with Nio sustaining robust year-over-year development by the tip of the 12 months.
The Semiconductor Scarcity
First, let’s check out the semiconductor scarcity that has effects on Nio and different automotive shares.
The scarcity is without doubt one of the unwanted effects of the novel coronavirus pandemic. Individuals have been compelled to stay residence for months. They labored from residence, they went to highschool at residence, and so they needed to depend on in-home leisure.
Naturally, the demand for tech units like new computer systems and gaming consoles went by the roof. Meaning fewer semiconductors for the automotive business.
Deloitte says that the standard motorized vehicle has roughly 1,300 semiconductor chips. However electrical autos function many extra — as a lot as 3,500 semiconductor chips per automobile.
Nio beforehand introduced that the scarcity would have an effect on manufacturing of latest autos within the second quarter. CEO William Li instructed analysts that Nio is able to producing 10,000 autos monthly. However the scarcity means the corporate will sluggish manufacturing to 7,500 autos.
Predictably, that announcement despatched NIO inventory decrease.
Skittish buyers who’re taking their earnings in Nio inventory ought to have a look at the larger image. Regardless of the semiconductor scarcity, Nio is producing extra EVs than ever. The expansion from a 12 months in the past is thru the roof.
In March, Nio says it delivered 7,257 autos, which is a brand new firm document. That features 1,529 of the corporate’s ES8s, which is a seven-seat premium SUV; 3,152 ES6s, which is the five-seat mannequin SUV; and a pair of,576 EC6s, which is the five-seat high-performance coupe.
In all, Nio’s March deliveries resulted in year-over-year development of 373%.
For the primary quarter, Nio delivered 20,060 autos, which was year-over-year development of 423%. That quantity got here as a nice shock as a result of Nio had revised its forecast of quarterly deliveries to 19,500 from its earlier forecast of 20,000 to 25,000.
So, regardless of the semiconductor scarcity, Nio was capable of fulfill its unique forecast in spite of everything. That prompted Financial institution of America Securities analyst Ming Hsun Lee to reiterate her “purchase” score on NIO inventory, and set a worth goal at $63.
That’s a projected upside of 59%.
It’s Not Simply About EV Gross sales
Nio not too long ago introduced the launch of its first totally autonomous driving electrical sedan, the Nio ET7. And that’s cause for Nio shareholders to have fun.
However a generally neglected a part of the Nio story is its gross sales of things that aren’t electrical autos. It additionally presents merchandise comparable to charging stations, web connection companies for autos, and warranties. The corporate additionally has power packages that features batter swapping and charging. And its service packages embody repairs, upkeep and an enhanced information package deal.
Nio says income from these strains of enterprise elevated by 184.1% to 71.6 million within the fourth quarter of 2020.
The Backside Line on NIO Inventory
It could be exhausting to beat Nio as a long-term development inventory. The electrical automobile market is exploding. And practically half of all electrical autos (47%) bought within the final 10 years have been from China.
Beijing is totally invested in Nio’s success. The Chinese language authorities chipped in additional than $1 billion in 2019 for Nio to get off the bottom. The corporate additionally has a partnership with Anhui Jianghuai Car Group, which is a state-owned auto producer.
Regardless of the semiconductor scarcity in Q2, Nio is producing extra electrical autos than ever and shortly will have the ability to rise up to the ten,000-per-month stage.
Nio inventory has an A grade in my Portfolio Grader, the place it continues to have a robust purchase advice.
On the date of publication, Louis Navellier and the InvestorPlace Analysis Employees member primarily liable for this text held lengthy positions in NIO.
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