In our article NIO is right now cheap, we noted that NIO (NIO) was about to deliver a large amount of cars in the future. We were not wrong. The company started the year 2021 by delivering 352% more cars than that in January 2020.
It does not matter whether the market celebrates the new information or not. This is a good news:
In the last month, traders have seen how the share price decreased from $66 to $55. In our view, the traders who acquired shares in 2020 at $30-$40 may be selling some shares. With that, we also believe that new traders are getting in as they get to know NIO’s business model.
In The Next Two Years, Massive Net Sales Growth Is Expected
Most analysts expect massive sales growth in the near future. We are talking about double digit sales growth and perhaps positive EBITDA in 2022:
In 2022, not only growth investors will buy shares of NIO. We expect value investors to start acquiring NIO equity in about one year or two. As a result, we believe that the liquidity in the market will increase, which will most likely lead to an increase in NIO stock price.
Growth investors who did study the company’s expected figures don’t really worry about the current valuation of NIO. They know what happened to the valuation of Tesla, the most relevant competitor of NIO. In less than ten years, Tesla saw its total valuation increasing from less than $50 billion to more than $800 billion. Tesla and NIO operate in the same market, so it is likely that NIO’s total valuation will increase like that of Tesla:
NIO’s current market capitalization is $80-$90 billion. The current amount of revenue does not really justify this valuation. However, the expected business growth and the expected expansion of the electric vehicle are quite significant.
NIO needs money right now for capital expenses. Notice that CAPEX is expected to increase more than 40% in 2021 and 16% in 2022. In our opinion, only those investors who help finance the company’s future expansion will get paid:
Investors need to be well aware of what they own. If you do, you would not worry about NIO’s share price volatility. NIO is operating in the electric vehicle market, which is, right now, one of the hottest industries.
Besides, NIO sales growth will most likely grow by more than 60%, and capital expenditures are also increasing. It does not matter whether the company’s sales are significant right now. NIO is an opportunity because it is expected to become a large enterprise. To sum up, think about the future, don’t think about the present to make dollars.
Disclosure: We don’t have shares of NIO, and we were not paid to write this article.