NIO (NYSE:NIO) is one of my favourite EV manufacturers. It owns some excellent technology, it has a strong range of EV on the market and it has Tesla-beating performance.
But the stock tanked yesterday, falling some 9% on the back of news that China would be reintroducing measures to slow the spread of Covid-19.
I’m already up around 40% on NIO. I was fortune enough to buy in early May when the share price fell to around $13. But, maybe this recent fall represents another good chance to buy?
Valuation
NIO might be up 40% since its low in May, but it’s still down 55% over the past 12 months. Like other growth stocks, the share price collapsed towards the beginning of the year as investors moved towards value.
But for me, NIO looks good value compared to its peers. The stock currently has a price-to-sales (P/S) ratio of 5.5, which I consider good value given its growth prospects. The metric shows a company’s market capitalisation divided by the company’s sales for the previous 12 months.
By comparison, Tesla has a P/S ratio of 12. Rivian‘s P/S is 182, and Lucid is even more expensive (365).
Impressive growth
NIO has demonstrated impressive growth in recent years. Revenue has double in each of the last four years. In fact, in 2021, NIO sold 91,000 cars. That’s approximately 10 times the amount sold in 2018. Some might call this a Tesla-like growth curve.
2022 might see growth slow amid Covid-related disruption. But the company is opening its second factory, located in the NeoPark in Xinqiao, later this year. That will undoubtedly enhance production in the coming years.
Market-leading EVs
NIO employs battery-swapping technology. This allows owners to swap batteries at NIO stations, which can be done in just a matter of minutes. It’s much quicker than conventional charging technology. However, owners can also charge their cars in the conventional way at home.
By using larger batteries than its peers, NIO also claims that its EV can go further than Tesla’s cars. It doesn’t use the same testing standards as Tesla, but NIO says its new ET7 has a range of 1,000 kilometres.
The Shanghai-based company is also fitting its EV with some interesting features. NIO’s EV feature a voice-controlled gadget called Nomi — an Alexa-like device — which allows drivers to open the window or even take a selfie without pressing a button.
Risks
There are always risks and I’m a little concerned about China’s reaction to this current outbreak of Covid-19. Production was hit considerably in April when China closed businesses in an effort to stop the virus from spreading.
It’s also worth noting that NIO may struggle to gain traction in the US given its provenance. That won’t be great for business.
Buying more at $20
At $20 a share, I’d buy more NIO stock. Yes, there may be some near-term downside but in the long run, I believe this Chinese EV maker is best placed to challenge Tesla’s dominance.