Little over a month ago, I hypothesised that I could double my money by buying NIO (NYSE:NIO) stock as it dipped. However, even I did not expect the share price to gain so quickly.
The Chinese electric vehicle (EV) manufacturer’s share price fell as low as $12.71 in early May. Today it is trading for $22.68. The share price has been very volatile, especially for a company with a market cap around $30bn.
I’ve done pretty well with NIO, buying at around $13 and then more at $16. So, at $22.6, should I be buying more?
In my opinion, yes. Here’s why!
The next Tesla
NIO is on a growth curve that looks remarkably similar to that of Tesla, albeit a year or two behind. NIO has almost doubled annual car sales and revenue for four years in a row now. In 2021, the group sold 91,000 cars. That’s more than 10 times the number sold in 2018.
It’s also releasing new models much quicker than Tesla. In 2022, NIO will begin delivering three new vehicle models and will open its second factory, located in the NeoPark in Xinqiao, Anhui province. The factory will go operational in the third quarter.
Cheaper than its competitors
Compared to other EV makers, NIO looks cheap, despite its recent gains.
So, the company is yet to make a profit, and it doesn’t anticipate being profitable until 2024. Tesla is the only really profitable EV maker at this time.
But, when we look at price-to-sales ratios, that’s where NIO looks cheap. The Shanghai-based firm has a price-to-sales ratio of around 6. Tesla, on the other hand, has a P/S ratio of around 10.
Other US EV newcomers like Rivian and Lucid have incredibly high P/S ratios.
An industry leader
I really like what NIO has to offer customers. Firstly, it uses a battery swapping technology that allows customers to switch their empty batteries for full ones in a matter of minutes. That gives it a real technological advantage over Tesla.
Secondly, NIO has expanded beyond just cars. It realises that its customers don’t buy a new car everyday. So NIO lovers can even purchase their groceries through the EV manufacturer.
Thirdly, NIO cars are filled with interesting features. Admittedly some are not needed in a car. Nomi — an Alexa like device on the dashboard — can carry out commands like opening and closing the window and even take a selfie. I’m not sure how bothered I am about the selfie, but the window opening could prove handy.
Plenty of headroom
At $22 a share, NIO is still 48% down over the past 12 months. The share price collapsed along with other growth stocks. This was compounded by Chinese Covid-related lockdowns over the past couple of months.
These Chinese lockdowns do concern me. It’s clear that they have the capacity to slow NIO’s growth trajectory this year. However, in the long run, I’m hoping China finds a new strategy to deal with Covid.