NIO Inc.

NIO Details

Q1FY21 Delivery Update: NIO Inc. (NYSE: NIO) manufactures premium smart electric vehicles. The market capitalization of the company as on 14 April 2021 stood at ~$60.65 billion. The company has recently released its first-quarter 2021 performance update and reported delivery of 7,257 vehicles in March 2021, an increase of ~373% y-o-y. It made a delivery of 20,060 vehicles in the three months ended March 2021, reflecting an increase of ~423% y-o-y. The total deliveries of the ES8, ES6 and EC6 stood at 95,701 as of 31 March 2021.

FY20 Results Update: During the year, the company reported an impressive increase in vehicle sales to $2.32 billion, compared to revenue of ~$1.12 billion in the prior period. The net loss narrowed down to $812.88 million. It ended the period with a comfortable cash position of $5.88 billion as of 31 December 2020.

FY20 Financial Performance (Source: Company Reports)

Outlook: The company founded in November 2014 aims to build a community that uses smart electric vehicles. On 9 January 2021, NIO launched the ET7 smart electric flagship sedan, its first autonomous driving model.

Key Risks: The company faces the risk of a semiconductor chips shortage, which has been impacting the industry as a whole lately. This may have a direct impact on the company’s operations and might impact production and profitability.

Stock Recommendation: The company has announced a temporary suspension of production in its JAC-NIO manufacturing plant in Hefei for five working days starting from March 29, 2021 due to a semiconductor shortage. The stock of NIO is trading above its average 52-weeks’ levels of $66.99-$2.88. The stock of NIO gave a positive return of ~39.69% in the past six months and a negative return of ~40.43% in the past three months. On a technical analysis front, the stock of NIO has a support level of ~$32.04 and a resistance level of ~$39.44. On a TTM basis, the stock of NIO is trading at a P/BV multiple of 1.2x, lower than the industry average (Automobiles & Auto Parts) of 2.2x. Considering the valuation on TTM basis, decent increase in the top-line, significant rise in vehicle sales and comfortable cash position, we recommend a ‘Buy’ rating on the stock at the closing price of $37.02, down by 3.79% as on April 14, 2021.

NIO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Nikola Corporation

NKLA Details

Business Update: Nikola Corporation (NASDAQ: NKLA) is engaged in the manufacturing of zero-emission battery-electric and hydrogen-electric vehicles. The market capitalization of the company as on 14 April 2021 stood at ~$4.60 billion. As per a recent update, the company has announced that it has agreed to a collaboration with IVECO and OGE. The collaboration seeks to establish a business structure for the purpose of transporting hydrogen via pipeline network from production sources to fuelling stations to support fuel-cell electric vehicles (FCEVs).

FY20 Performance Update: During the year, the company made a net loss of $384.31 million, compared to a loss of $88.65 million in the prior corresponding period. Adjusted EBITDA stood at negative $200.48 million during the same period under consideration. It ended the year with a cash position of $840.91million.

FY20 Financial Performance (Source: Company Reports)

Outlook: The company plans to commence the trial production at its JV manufacturing facility on IVECO’s campus in Ulm, Germany in June 2021. It also plans to start the trial production at its greenfield manufacturing facility in Coolidge, Arizona, in Q3FY21. It aims to deliver the first Nikola Tre BEV’s to customers during the fourth quarter of 2021.

Key Risks: The company is faced with litigation charges and is faced with investor claims that it has mispresented its technology and business, causing its financial prospectus to be overvalued.

Stock Recommendation: The company has announced its plans to provide sales and service products for commercial customers at over 65 dealer locations along with a partnership with RIG360. The stock of NKLA is trading close to its 52-weeks’ low levels of $93.99-$11.32. The stock of NKLA gave a negative return of ~51.26% in the past six months and a negative return of ~31.12% in the past one month. On a technical analysis front, the stock of NKLA has a support level of ~$11.41 and a resistance level of ~$14.738. On a TTM basis, the stock of NKLA is trading at a P/BV multiple of 4.8x, higher than the industry median (Automobiles & Auto Parts) of 2.4x. Considering the valuation on TTM basis, widening net losses, limited revenue visibility and the litigation charges against the company, we give an ‘Avoid’ rating on the stock at the closing price of $11.750, down by 2.49% as on April 14, 2021.

NKLA Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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