3:34:37 PM PDT - Saturday, October 31st, 2020

Got Guts? Buy Nio Stock at This Super-High Valuation  

By Editor - Fri Oct 16, 3:50 pm

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From mid-May 2020 to mid-October, shares of Chinese electric vehicle-maker NIO Limited (NIO) have run up more than seven times in price — 733% to be precise. Recognizing his error in not recommending the stock earlier, JPMorgan's Head of Asia Auto Research Nick Lai issued a mea culpa this week: “Admittedly, we missed the stock's major rally YTD.”But better late than never.Even if Lai missed the last 733 percentage points worth of gains, he thinks there's still time for investors to catch the next 44% profit, and for this reason, Lai has upgraded NIO shares to “overweight” with a $40 price target. (To watch Lai's track record, click here)Why does Lai think there are still gains to be had here? In a nutshell, because the Chinese car market is changing. What is going on today, explains the analyst, is similar to “the transition from feature phone to smartphone over 2007-2014.” An entire type of product — cars powered by internal combustion engines — is being made obsolete and replaced by a new type of product: “new energy vehicles” (NEVs, include both fully electric cars and plug-in hybrids).Chinese car-buyers are adopting these new electric vehicles in droves. And adding electric fuel to the fire, Lai argues that as EV car prices reach “parity” with the cost of gasoline-powered automobiles (around about 2022 or 2023), the initial wave of EV purchasing by businesses will be supplemented by consumers stepping up to buy electrics as their personal vehicles — sustaining the sales momentum for years to come.Currently, about 5% of the Chinese automobile market (21.4 million cars sold in 2019 — 25% more than in the U.S.) is electric. But the analyst projects that this market share will quadruple or even quintuple by 2025, to as many as 20% or even 25% of all cars sold in the Middle Kingdom.

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Got Guts? Buy Nio Stock at This Super-High Valuation

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