NIO stock: bull vs bear

Bullish: Chris MacDonald

In my opinion, one can’t be bullish on Tesla and bearish on NIO (NYSE: NIO) stock. From a growth perspective, both have similar outlooks (one could argue the outlook for China’s EV market is much more significant than the Americas or Europe (China’s EV market share as a percentage of the global market is more than 50%, and China is by far the fastest-growing large economy in terms of EV adoption).

Those bearish on NIO typically point to the fact that the company’s based in China. However, the recent regulatory crackdowns haven’t hit the Chinese EV sector for a reason. There’s not likely to be a willingness from the Chinese government to kill its “golden goose.” NIO is the poster child of the EV sector in China, and President Xi has a reason to want global dominance in this space. Accordingly, I see a greater probability that American companies like Tesla will get pushed out of China (by far the most lucrative EV market) in the future, favoring NIO’s dominant market position as the leading Chinese EV manufacturer. There’s already been steps made in this direction.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

From a valuation standpoint, NIO’s price-sales multiple and essentially every other financial metric are many times better than that of Tesla, given how far it’s run. I think the market is currently viewing Tesla as the only global EV player that will make it, and essentially all other EV companies globally will be flops. This is indicated by the fact that Tesla’s market cap is higher than the combined market caps of the next 14 largest companies at the time of writing.

Chris MacDonald owns shares in NIO.

Bearish: Roland Head

I’m a big fan of electric cars. But I won’t be buying shares in upmarket Chinese EV manufacturer NIO. Although sales are growing fast and I’ve seen good reviews of the company’s cars, there are some things I just can’t accept.

As I write, NIO has a market cap of almost £55bn. To put that in context, US group General Motors is valued at £57bn — almost the same. That’s where the similarity ends, though.

NIO delivered just 43,728 cars in 2020, valuing the business at £1.3m for each car sold. In contrast, General Motors sold 2,547,339 cars in 2020. That values GM at just £22,400 for each car sold.

Admittedly, GM is slow growing, while NIO’s deliveries doubled in 2020. Based on sales so far this year, I suspect NIO sales could double again in 2021. If sales continue to grow at this rate, NIO could match GM’s sales in six years’ time.

Personally, I think that’s unlikely. All the world’s main car manufacturers are now investing heavily in electric car production. During the third quarter of this year, GM sold more than 100,000 EVs in China alone — 10 times more than NIO sold globally.

Over the next few years, I reckon we’ll see big manufacturers like GM, Volkswagen and Ford playing catchup with EV specialists like NIO. As customer choice improves, I think the market will get tougher for smaller manufacturers.

Buying NIO shares means paying upfront for years of future growth. I’m not comfortable with this. In my view, the risks outweigh the potential rewards.

Roland has no position in any of the shares mentioned.

The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Comments are closed.