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The market continually surged to new highs in December and that momentum carried over into 2021. Cyclical industries, as well as green energy stocks and other areas that have gotten the Biden bump, jumped last week on the back of the Democratic sweep in Georgia. Retail behemoth Target doesn’t necessarily fit exactly into this mold, but it has surged to new records all the same to start the year.
Big Retail Keeps Getting Bigger…
The Minneapolis-based retailer is projected to pull in $91 billion in 2020 and has continued to impress Wall Street through its successful e-commerce advancements, margin growth, and more.
TGT’s same-day offerings feature in-store pickup, Drive Up, and its subscription-style Shipt unit. These various options have helped Target shine during the coronavirus and more importantly, position itself for continued success. The retailer’s third quarter sales surged 21%, which marked its second-straight quarter of over 20% revenue growth (25% in Q2).
More specifically, its digital comps skyrocketed 155%, with in-store comparable sales up 10%. The ability to grow its e-commerce unit while expanding its brick-and-mortar business remains vital since e-commerce accounted for roughly 14% of total U.S. retail sales in Q3, down from a record 16% in Q2.
The overall figure was up significantly from 11% in the year-ago period. Yet, the digital commerce frenzy and the constant news stories might have made some people assume that e-commerce plays a far larger role already.
Built to Win
Target has attracted loyal customers through on-trend and affordable fashion, home décor, furniture, food, and more. This has helped it stand out from rivals such as Walmart within some key demographic groups. TGT has also done countless partnerships with designers on fashion and furniture over the years and more recently landed deals with brands like Levi Strauss that were once staples at department stores.
As department stores continue to struggle to adapt to an age where people shop on their smartphones and buy from upstart brands directly on Instagram, Target has positioned itself for long-term growth. TGT’s flagship grocery brand, Good & Gather, has also performed well since its launch in September 2019.
What Else
Target has improved its margins during the coronavirus, as it continues to outperform Walmart and Amazon. In fact, the retailer’s Q3 operating income margin climbed to 8.5%, up from 5.4% in the year-ago period. TGT stock has also crushed WMT over the last 12 months, up 60% vs. 28%, and it is neck and neck with AMZN. The nearby chart shows that this run extended over the past three years as well, with TGT up nearly 160%.
The company’s overall performance has been boosted by recent strength, with the stock up 65% in the past six months and 17% in the last month alone. TGT popped again on Monday to reach another all-time high of nearly $200 per share.
Despite the climb, Target trades at a discount, as it has for years, to its industry and its peer group, at 22.9X forward 12-month earnings vs. 25.6X. This also comes in below Walmart’s 25.4X.
Alongside its impressive run over the last several years, Target’s 1.4% dividend yield roughly matches Walmart and easily beats the recently rising 10-year U.S. Treasury note’s 1.1%.
Bottom Line
Zacks estimates call for TGT’s fourth quarter revenue to climb 12.2% to $26.27 billion, which is projected to help lift its bottom-line by 23% to $2.08 a share. The retailer’s adjusted fiscal 2020 EPS is expected to soar 37% on nearly 17% higher sales. This would mark by far its strongest sales expansion in at least the past 20 years to top 2007’s 13% and crush recent years of around 3.5%.
Target’s strong upward earnings revisions trends help it land a Zacks Rank #1 (Strong Buy) right now. The company is projected to see its top and bottom lines pull back ever so slightly in 2021, as it might be nearly impossible to recreate last year’s conditions.
That said, investors should pay close attention to its Q4 release, as shopping habits are likely to stay in place for a long time, as big retail continues to crush its smaller competitors. It’s also worth noting that its Retail-Discount space sits in the top 15% of our over 250 Zacks industries. Plus, 12 out of the 18 brokerage recommendations Zacks has for Target come in at a “Strong Buy” right now.
Clearly, there could be some near-term selling pressure given Target’s surge. Nonetheless, longer-term investors might want to consider adding TGT as a retail titan that’s poised to thrive.
The coronavirus has devastated the global travel industry and Expedia has certainly suffered. Yet EXPE stock has already surged all the way back to new 52-week highs, despite a somewhat cloudy outlook for travel and hospitality even amid the progress on the coronavirus vaccine front.
What’s the Story?
Expedia is one of the world's biggest travel platforms, operating under its namesake brand, as well as Hotels.com, Vrbo, Travelocity, and many others. The tech-focused travel booking company that helps consumers book hotels, rental cars, flights, and more.
Expedia’s top-line growth had already slowed down in 2019, long before the pandemic crushed global travel. EXPE’s revenue climbed around 8% last year, which marked its slowest growth in the last decade. Then the coronavirus upended things completely, with its sales down 15% in the first quarter, 82% in Q2, and 58% last quarter.
The company took on some debt to help boost its cash position, alongside much of the industry. EXPE also increased its commitment to additional cost-cutting measures such as job cuts, which were first reported back in February, before things shut down.
Bags Packed Too Soon?
Expedia has now outpaced the S&P 500 over the last year and has crushed it over the past six months, up 75% vs. 22%. Clearly, investors have started to look ahead in anticipation of increased travel demand. In fact, the stock has soared over 50% since the end of October, driven by vaccine positivity.
This includes a 15% surge in the past month that helped Expedia stock hit new 52-week records of over $147 per share in the first week of January. Airbnb’s stellar IPO in December further highlighted how eager investors were to play the potential travel bounce back. Even though EXPE has about 8% more room to climb before it touches its 2017 highs, it might still have come a bit too far too fast.
Zacks estimates call for EXPE’s fourth quarter revenue to fall 58% to match the third quarter’s downturn. Meanwhile, it’s projected to swing from adjusted earnings of +$1.24 a share in the year-ago period to a loss of -$1.74 a share.
Peeking ahead, Expedia is expected to post an adjusted loss of -$1.46 per share in the first quarter of FY21 on 33% lower revenue. This looks even worse when you consider that these first quarter estimates come up against an easier to compare Q1 FY20 that included the start of the lockdowns.
Bottom Line
The nearby chart shows that Expedia’s earnings outlook has slipped recently to help it earn a Zacks Rank #5 (Strong Sell) right now. The stock also rocks “D” grades for Value and Momentum and an “F” for Growth in our Style Scores system. Plus, Expedia is part of an Internet Commerce space that sits in the bottom 15% of our over 250 Zacks industries.
Expedia’s longer-term FY21 outlook does look better. Still, investors who already missed out on the big ride during the past six months might want to hold off considering the near-term uncertainty that continues to surround the travel industry.
Additional content:
NIO Annual Day a Smashing Success: Should Tesla Take Note?
NIO, dubbed as the “Tesla of China,” is pulling out all stops to solidify its standing in the electric vehicle (EV) space. The much-awaited NIO Day (held on Jan 9) filled with fun, fiesta and music has indeed grabbed eyeballs with some major announcements. Has the event managed to live up to the expectations of users, fans and investors alike? Well, it seems so as the stock is up more than 11% so far in the premarket session today.
Can NIO give other EV players including Tesla a run for their money as it steps up its e-mobility game with the upcoming product and services launch? Before that, let’s delve into key takeaways from the fourth NIO Annual Day.
Golden Nuggets of the Event
First Flagship Sedan: The firm unveiled a new luxury ET7 sedan, with a base price of around $69,000, which can go up to more than $80,000, depending upon the configuration. ET7 — with a catchy tagline "Ready For Tomorrow" — will be the company’s fourth EV model after ES6, ES8 and EC6.
Coming to the aesthetics of the vehicle, ET7 is designed with a “cozy living room” concept. Boasting soft closing doors, frameless windows and seats with heating, ventilation and inbuilt massage functions, the EV has an eye-catching design. Equipped with new autonomous driving technology, ET7 would come with two battery choices: 70 kilowatt per hour (kWh) and 100kWh.
While pre-orders for the car began during the weekend, deliveries are expected to commence in first-quarter 2022. By late 2022, ET7 — powered by a 150-kWh battery pack — will be rolled out, which would offer a range of more than 600 miles.
Ultra-High Energy Density Batteries: As expected, NIO announced the 150kWh solid-state battery technology, which would increase energy density by 50%. Promising an enhanced charging efficiency and a better battery life, deliveries of the batteries are expected to start from fourth-quarter 2022. Importantly, the company confirmed that all NIO users could upgrade to 150 kWh. As a reminder, it released the 100-kwh battery pack in November 2020. Announcement of an enhanced 150-kwh battery pack barely within a couple of months goes to show that NIO is focused on improving its technology and battery range amid rising competition.
Next-Gen Battery Swapping Stations: The firm’s next-gen battery power stations — Power Swap Station 2.0 — would enable automatic parking of cars, thanks to the autopilot system. These would also facilitate battery swap with one tap on the button. Importantly, the stations would have the capacity of providing 312 battery swaps daily. The company targets to deploy 500 stations of next-gen Baas (Battery as a Service) by year end.
Driverless Technology: NIO has taken the driverless technology game a notch higher with the Aquila NAD (NIO Autonomous Driving) system. NAD is primarily based on autonomous driving sensors and software suite called Aquila, along with the computing platform called Adam. Boasting 33 high-precision sensors, 12 ultrasonic sensors, 8MP high resolution cameras, 5 millimeter-wave radars, ultra-long distance high-precision LIDAR, two high-precision positioning units and enhanced driver perception, NIO is set to provide a safer and relaxed point-to-point autonomous driving experience. It should be noted that NIO’s Adam is powered by NVIDIA microprocessors. It would feature four NVIDIA Orin supercomputers on a chip boasting 1,016 TOPS in computing power.
Some Speed Bumps
Amid this air of excitement, there are a couple of things that make us a bit wary. The delivery timelines of its ET7 model and 150-kWh battery pack are not much encouraging. While the car is at least a year away, the battery breakthrough would not be available till late 2022. Another question that comes to mind is whether the company is actually making batteries or is it purchasing the same from CATL?
Reportedly, a reporter received an English translation of NIO’s CEO William Li’s statement. Li is likely to have meant that the company adopts the most advanced production-ready, solid-state battery technology. By not explicitly saying that the firm is manufacturing the battery, one can easily assume that NIO is rather buying the same from CATL. If that’s true, NIO would actually have little control over the production pipeline, and will be exposed to any delays and hindrances by CATL. Additionally, with CATL having partnership ties with various auto biggies including Tesla and others these automakers might get their hands on the batteries. In that case, will the battery technology provide an edge to NIO? Nonetheless, we cannot be completely sure if the company is actually purchasing batteries until more details are unveiled.
Is NIO Geared Up to Challenge Tesla?
While NIO is set to bring ET7 into the market, the luxury sedan will face strong competition from Tesla’s China-made Model 3 and Y. Tesla claims the lion’s share of China’s flourishing EV market, riding on the high popularity of Model 3 SUVs and solid production prospects in Shanghai Gigafactory. Last month, Tesla also secured a green signal to sell Shanghai-made Model Y in China.
With Tesla being a bigger and more established brand, and riding on the huge popularity of Model 3 and Y vehicles, we don’t believe that NIO’s ET7 will pose a major challenge to Tesla’s EVs. As it is, Model 3 and Y are less expensive options that are available for around $36,800 and $52,000, respectively, compared with NIO’s ET7, which will anyway release a year later. As such, Tesla seems to be continuing to dominate China’s EV market.
Coming to NIO’s autonomous technology and BaaS service, could they be game changers?
In comparison to NIO’s NAD technology, Tesla’s autopilot deploys 1.2MP cameras. Also, while NAD makes use of LIDAR sensors that are considered to be the soul of driverless technology, Tesla’s CEO Musk finds the same quite unnecessary, which has resulted in a big debate among many industry watchers.
Additionally, Tesla's two-chip FSD computer at 144 TOPs compares unfavorably with NIO's four NVIDIA chips capable of performing 1,016 TOPS. William Li claims that the firm’s computing platform, Adam, has seven times more computing power than Tesla’s FSD. NIO further has an edge in this arena as it plans to offer driverless solutions on a monthly subscription basis unlike Tesla, wherein one needs to buy the driverless solution. This would not only result in a recurring stream of service revenues for NIO but also lower the entry price to purchase a car.
Coming to its solid state battery technology update, if NIO is actually working on manufacturing the 150-kWh battery pack (chances of which are slim) or is in an exclusive agreement with some supplier, then things may get more optimistic. In that case, NIO will offer a range of more than 600 miles. This is higher than Tesla Model S’ range of more than 400 miles, which is the maximum range offered by any Tesla car.
NIO’s battery swap technology provides a clear edge to the firm over peers. Management claims that a battery pack can be replaced in the vehicles in about three minutes. The technology, which is part of NIO’s BaaS strategy, helps in saving time while charging an EV and alleviates range anxieties. It should be noted that the company has completed more than 1.5 million battery swaps till now.
All in all, while a lot is going in favor of NIO, which currently carries a Zacks Rank #3 (Hold), the company is a relatively newer and smaller brand than the EV titan Tesla. Until there is more validation about NIO’s ambitious goals, it’s not very likely that the firm can pose a serious challenge to Tesla on its home turf. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Target, Expedia, NIO, Tesla and NVIDIA highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 12, 2021 – Zacks Equity Research Shares of Target Corporation (TGT - Free Report) as the Bull of the Day, Expedia Group, Inc. (EXPE - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NIO Inc. (NIO - Free Report) , Tesla, Inc. (TSLA - Free Report) and NVIDIA Corporation (NVDA - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
The market continually surged to new highs in December and that momentum carried over into 2021. Cyclical industries, as well as green energy stocks and other areas that have gotten the Biden bump, jumped last week on the back of the Democratic sweep in Georgia. Retail behemoth Target doesn’t necessarily fit exactly into this mold, but it has surged to new records all the same to start the year.
Big Retail Keeps Getting Bigger…
The Minneapolis-based retailer is projected to pull in $91 billion in 2020 and has continued to impress Wall Street through its successful e-commerce advancements, margin growth, and more.
TGT’s same-day offerings feature in-store pickup, Drive Up, and its subscription-style Shipt unit. These various options have helped Target shine during the coronavirus and more importantly, position itself for continued success. The retailer’s third quarter sales surged 21%, which marked its second-straight quarter of over 20% revenue growth (25% in Q2).
More specifically, its digital comps skyrocketed 155%, with in-store comparable sales up 10%. The ability to grow its e-commerce unit while expanding its brick-and-mortar business remains vital since e-commerce accounted for roughly 14% of total U.S. retail sales in Q3, down from a record 16% in Q2.
The overall figure was up significantly from 11% in the year-ago period. Yet, the digital commerce frenzy and the constant news stories might have made some people assume that e-commerce plays a far larger role already.
Built to Win
Target has attracted loyal customers through on-trend and affordable fashion, home décor, furniture, food, and more. This has helped it stand out from rivals such as Walmart within some key demographic groups. TGT has also done countless partnerships with designers on fashion and furniture over the years and more recently landed deals with brands like Levi Strauss that were once staples at department stores.
As department stores continue to struggle to adapt to an age where people shop on their smartphones and buy from upstart brands directly on Instagram, Target has positioned itself for long-term growth. TGT’s flagship grocery brand, Good & Gather, has also performed well since its launch in September 2019.
What Else
Target has improved its margins during the coronavirus, as it continues to outperform Walmart and Amazon. In fact, the retailer’s Q3 operating income margin climbed to 8.5%, up from 5.4% in the year-ago period. TGT stock has also crushed WMT over the last 12 months, up 60% vs. 28%, and it is neck and neck with AMZN. The nearby chart shows that this run extended over the past three years as well, with TGT up nearly 160%.
The company’s overall performance has been boosted by recent strength, with the stock up 65% in the past six months and 17% in the last month alone. TGT popped again on Monday to reach another all-time high of nearly $200 per share.
Despite the climb, Target trades at a discount, as it has for years, to its industry and its peer group, at 22.9X forward 12-month earnings vs. 25.6X. This also comes in below Walmart’s 25.4X.
Alongside its impressive run over the last several years, Target’s 1.4% dividend yield roughly matches Walmart and easily beats the recently rising 10-year U.S. Treasury note’s 1.1%.
Bottom Line
Zacks estimates call for TGT’s fourth quarter revenue to climb 12.2% to $26.27 billion, which is projected to help lift its bottom-line by 23% to $2.08 a share. The retailer’s adjusted fiscal 2020 EPS is expected to soar 37% on nearly 17% higher sales. This would mark by far its strongest sales expansion in at least the past 20 years to top 2007’s 13% and crush recent years of around 3.5%.
Target’s strong upward earnings revisions trends help it land a Zacks Rank #1 (Strong Buy) right now. The company is projected to see its top and bottom lines pull back ever so slightly in 2021, as it might be nearly impossible to recreate last year’s conditions.
That said, investors should pay close attention to its Q4 release, as shopping habits are likely to stay in place for a long time, as big retail continues to crush its smaller competitors. It’s also worth noting that its Retail-Discount space sits in the top 15% of our over 250 Zacks industries. Plus, 12 out of the 18 brokerage recommendations Zacks has for Target come in at a “Strong Buy” right now.
Clearly, there could be some near-term selling pressure given Target’s surge. Nonetheless, longer-term investors might want to consider adding TGT as a retail titan that’s poised to thrive.
Bear of the Day:
The coronavirus has devastated the global travel industry and Expedia has certainly suffered. Yet EXPE stock has already surged all the way back to new 52-week highs, despite a somewhat cloudy outlook for travel and hospitality even amid the progress on the coronavirus vaccine front.
What’s the Story?
Expedia is one of the world's biggest travel platforms, operating under its namesake brand, as well as Hotels.com, Vrbo, Travelocity, and many others. The tech-focused travel booking company that helps consumers book hotels, rental cars, flights, and more.
Expedia’s top-line growth had already slowed down in 2019, long before the pandemic crushed global travel. EXPE’s revenue climbed around 8% last year, which marked its slowest growth in the last decade. Then the coronavirus upended things completely, with its sales down 15% in the first quarter, 82% in Q2, and 58% last quarter.
The company took on some debt to help boost its cash position, alongside much of the industry. EXPE also increased its commitment to additional cost-cutting measures such as job cuts, which were first reported back in February, before things shut down.
Bags Packed Too Soon?
Expedia has now outpaced the S&P 500 over the last year and has crushed it over the past six months, up 75% vs. 22%. Clearly, investors have started to look ahead in anticipation of increased travel demand. In fact, the stock has soared over 50% since the end of October, driven by vaccine positivity.
This includes a 15% surge in the past month that helped Expedia stock hit new 52-week records of over $147 per share in the first week of January. Airbnb’s stellar IPO in December further highlighted how eager investors were to play the potential travel bounce back. Even though EXPE has about 8% more room to climb before it touches its 2017 highs, it might still have come a bit too far too fast.
Zacks estimates call for EXPE’s fourth quarter revenue to fall 58% to match the third quarter’s downturn. Meanwhile, it’s projected to swing from adjusted earnings of +$1.24 a share in the year-ago period to a loss of -$1.74 a share.
Peeking ahead, Expedia is expected to post an adjusted loss of -$1.46 per share in the first quarter of FY21 on 33% lower revenue. This looks even worse when you consider that these first quarter estimates come up against an easier to compare Q1 FY20 that included the start of the lockdowns.
Bottom Line
The nearby chart shows that Expedia’s earnings outlook has slipped recently to help it earn a Zacks Rank #5 (Strong Sell) right now. The stock also rocks “D” grades for Value and Momentum and an “F” for Growth in our Style Scores system. Plus, Expedia is part of an Internet Commerce space that sits in the bottom 15% of our over 250 Zacks industries.
Expedia’s longer-term FY21 outlook does look better. Still, investors who already missed out on the big ride during the past six months might want to hold off considering the near-term uncertainty that continues to surround the travel industry.
Additional content:
NIO Annual Day a Smashing Success: Should Tesla Take Note?
NIO, dubbed as the “Tesla of China,” is pulling out all stops to solidify its standing in the electric vehicle (EV) space. The much-awaited NIO Day (held on Jan 9) filled with fun, fiesta and music has indeed grabbed eyeballs with some major announcements. Has the event managed to live up to the expectations of users, fans and investors alike? Well, it seems so as the stock is up more than 11% so far in the premarket session today.
Can NIO give other EV players including Tesla a run for their money as it steps up its e-mobility game with the upcoming product and services launch? Before that, let’s delve into key takeaways from the fourth NIO Annual Day.
Golden Nuggets of the Event
First Flagship Sedan: The firm unveiled a new luxury ET7 sedan, with a base price of around $69,000, which can go up to more than $80,000, depending upon the configuration. ET7 — with a catchy tagline "Ready For Tomorrow" — will be the company’s fourth EV model after ES6, ES8 and EC6.
Coming to the aesthetics of the vehicle, ET7 is designed with a “cozy living room” concept. Boasting soft closing doors, frameless windows and seats with heating, ventilation and inbuilt massage functions, the EV has an eye-catching design. Equipped with new autonomous driving technology, ET7 would come with two battery choices: 70 kilowatt per hour (kWh) and 100kWh.
While pre-orders for the car began during the weekend, deliveries are expected to commence in first-quarter 2022. By late 2022, ET7 — powered by a 150-kWh battery pack — will be rolled out, which would offer a range of more than 600 miles.
Ultra-High Energy Density Batteries: As expected, NIO announced the 150kWh solid-state battery technology, which would increase energy density by 50%. Promising an enhanced charging efficiency and a better battery life, deliveries of the batteries are expected to start from fourth-quarter 2022. Importantly, the company confirmed that all NIO users could upgrade to 150 kWh. As a reminder, it released the 100-kwh battery pack in November 2020. Announcement of an enhanced 150-kwh battery pack barely within a couple of months goes to show that NIO is focused on improving its technology and battery range amid rising competition.
Next-Gen Battery Swapping Stations: The firm’s next-gen battery power stations — Power Swap Station 2.0 — would enable automatic parking of cars, thanks to the autopilot system. These would also facilitate battery swap with one tap on the button. Importantly, the stations would have the capacity of providing 312 battery swaps daily. The company targets to deploy 500 stations of next-gen Baas (Battery as a Service) by year end.
Driverless Technology: NIO has taken the driverless technology game a notch higher with the Aquila NAD (NIO Autonomous Driving) system. NAD is primarily based on autonomous driving sensors and software suite called Aquila, along with the computing platform called Adam. Boasting 33 high-precision sensors, 12 ultrasonic sensors, 8MP high resolution cameras, 5 millimeter-wave radars, ultra-long distance high-precision LIDAR, two high-precision positioning units and enhanced driver perception, NIO is set to provide a safer and relaxed point-to-point autonomous driving experience. It should be noted that NIO’s Adam is powered by NVIDIA microprocessors. It would feature four NVIDIA Orin supercomputers on a chip boasting 1,016 TOPS in computing power.
Some Speed Bumps
Amid this air of excitement, there are a couple of things that make us a bit wary. The delivery timelines of its ET7 model and 150-kWh battery pack are not much encouraging. While the car is at least a year away, the battery breakthrough would not be available till late 2022. Another question that comes to mind is whether the company is actually making batteries or is it purchasing the same from CATL?
Reportedly, a reporter received an English translation of NIO’s CEO William Li’s statement. Li is likely to have meant that the company adopts the most advanced production-ready, solid-state battery technology. By not explicitly saying that the firm is manufacturing the battery, one can easily assume that NIO is rather buying the same from CATL. If that’s true, NIO would actually have little control over the production pipeline, and will be exposed to any delays and hindrances by CATL. Additionally, with CATL having partnership ties with various auto biggies including Tesla and others these automakers might get their hands on the batteries. In that case, will the battery technology provide an edge to NIO? Nonetheless, we cannot be completely sure if the company is actually purchasing batteries until more details are unveiled.
Is NIO Geared Up to Challenge Tesla?
While NIO is set to bring ET7 into the market, the luxury sedan will face strong competition from Tesla’s China-made Model 3 and Y. Tesla claims the lion’s share of China’s flourishing EV market, riding on the high popularity of Model 3 SUVs and solid production prospects in Shanghai Gigafactory. Last month, Tesla also secured a green signal to sell Shanghai-made Model Y in China.
With Tesla being a bigger and more established brand, and riding on the huge popularity of Model 3 and Y vehicles, we don’t believe that NIO’s ET7 will pose a major challenge to Tesla’s EVs. As it is, Model 3 and Y are less expensive options that are available for around $36,800 and $52,000, respectively, compared with NIO’s ET7, which will anyway release a year later. As such, Tesla seems to be continuing to dominate China’s EV market.
Coming to NIO’s autonomous technology and BaaS service, could they be game changers?
In comparison to NIO’s NAD technology, Tesla’s autopilot deploys 1.2MP cameras. Also, while NAD makes use of LIDAR sensors that are considered to be the soul of driverless technology, Tesla’s CEO Musk finds the same quite unnecessary, which has resulted in a big debate among many industry watchers.
Additionally, Tesla's two-chip FSD computer at 144 TOPs compares unfavorably with NIO's four NVIDIA chips capable of performing 1,016 TOPS. William Li claims that the firm’s computing platform, Adam, has seven times more computing power than Tesla’s FSD. NIO further has an edge in this arena as it plans to offer driverless solutions on a monthly subscription basis unlike Tesla, wherein one needs to buy the driverless solution. This would not only result in a recurring stream of service revenues for NIO but also lower the entry price to purchase a car.
Coming to its solid state battery technology update, if NIO is actually working on manufacturing the 150-kWh battery pack (chances of which are slim) or is in an exclusive agreement with some supplier, then things may get more optimistic. In that case, NIO will offer a range of more than 600 miles. This is higher than Tesla Model S’ range of more than 400 miles, which is the maximum range offered by any Tesla car.
NIO’s battery swap technology provides a clear edge to the firm over peers. Management claims that a battery pack can be replaced in the vehicles in about three minutes. The technology, which is part of NIO’s BaaS strategy, helps in saving time while charging an EV and alleviates range anxieties. It should be noted that the company has completed more than 1.5 million battery swaps till now.
All in all, while a lot is going in favor of NIO, which currently carries a Zacks Rank #3 (Hold), the company is a relatively newer and smaller brand than the EV titan Tesla. Until there is more validation about NIO’s ambitious goals, it’s not very likely that the firm can pose a serious challenge to Tesla on its home turf. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.