Which EV stock presents a better buy right now: the upstart innovative NIO, or the king of electric cars and classic meme stock, Tesla?
The battle of the EV companies is really speeding up and whilst Tesla (NASDAQ: TSLA) has held the crown for a number of years, it has many competitors that are soon going to rival it, both in popularity and in its technology.
One particular competitor is NIO (NYSE: NIO), AKA, The Chinese Tesla. NIO has seen a recent surge in popularity and as such many green energy investors are looking at the company with renewed interest. So, as the EV race continues in earnest, we look at which stock is a better investment right now: NIO or Tesla.
NIO is a Chinese EV company that has been hitting headlines recently. It has seen its popularity heighten over the last year as increased interest in the EV market has benefited it directly. Indeed, its stock price rose from $3 in early 2020 to over $35 currently. Its stock price is definitely encouraging, but this is not the only way to determine a company’s health.
NIO, during 2020, sold just under 44,000 cars, which is a rather small amount in comparison to other companies in the EV market. However, that number is a 109% increase from the 21,000 cars sold in 2019. This year, Q1 alone saw 20,000 vehicles sold, which is up 400% year-over-year (YoY). What is even more impressive is it has accomplished this all during a year of pandemic-related decrease in car sales. This is explosive growth and it bodes well for future expansion of its business.
Its Q1 results showed an increase in revenue of 481% YoY to $1.2 billion, whilst its gross profit increased 36% from the previous quarter, coming in at $237 million. With a large proportion of its profits going into research and development, it plans to keep producing new models and products which in turn will increase the number of different user groups.
Whilst the gross margins have improved, the company still has negative profit forecasts for the fiscal year 2022. Even in Q1, its net loss was $0.48 per share. This means that investors, who want to see quick and strong improvements in this area will have to be patient and rely on NIO continuing to innovate and invest in its vision for the future.
Tesla has its fair share of critics as well as advocates, particularly as its CEO Elon Musk holds an almost cult leader status. But its performance over the last year has made Tesla one of the most traded stocks on the NASDAQ.
In its recent Q1 results the EV giant received $518 million in revenue from regulatory credits sales, up 46% YoY. Furthermore, Tesla sold $272 million worth of cryptocurrency during the quarter, resulting in a profit of $100 million. Indeed, its adjusted earnings per share were $0.93 for the quarter, up 304% YoY.
Fiat Chrysler and PSA merged earlier this year creating a group called Stellantis. This doesn’t spell good news for Tesla, who previously relied on Fiat for at least $200 million for the sale of Tesla’s emissions credits. The combined Stellantis now meets regulatory requirements without needing to purchase credits. This will be an ongoing trend for the future as many car manufacturers switch to clean energy methods and regulatory credit sales will decline as a result.
However, Tesla consistently exceeds expectations and it is not likely to suffer too much from a loss in regulatory sales in the long run, particularly as it now entered the cryptocurrency world. It also managed to deliver 184,800 cars, beating analyst estimates for vehicle deliveries in Q1 by 16,800 cars. This is impressive as there is a notable number of competitors now in the EV space.
Tesla has seen a couple of setbacks this year, with its future loss in regulatory credit sales, plus the hit from the semi-conductor shortage. However, it has still produced a fantastic earnings report and it is still showing the world that it is the current king of the EV market.
So, which is a better investment?
In general, Tesla might seem like the better investment right now, as it has proven that it can grow consistently for several years. However, if, as an investor, you are looking for a company that is poised for large growth and the potential to bring high returns, then NIO is a good bet – albeit a bit more on the riskier side.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.