Chinese EV Stocks Continue To Surge After Strong Deliveries; 3 To Watch
Most investors’ attention is on the outcome of the U.S. presidential election. At the same time, investors appear confident that nothing can stop the electric vehicle stocks from marching higher. EV behemoth Tesla (TSLA Stock Report) saw its stock price up 12.9% this week. Some would say it’s a correction waiting to happen after the company saw its stock plummeted along with the broader market sell-off. This, however, isn’t what Wall Street is watching. Instead, investors are looking for top Chinese EV stocks to buy as these stocks continue to rally massively. In fact, they show no signs of stopping. So, what’s happening you ask?
The stock market extends its biggest rally since April this week, putting major indexes on track for their sharpest weekly gains since April. This came as investors cheered the diminished prospects of higher corporate taxes under a split Congress. Sure, the sentiment definitely works in favor of these EV stocks. But what is actually driving the rally among the Chinese EV stocks is the strong October vehicle delivery numbers. Besides, the prospect of a change of guard in the White House to an administration in favor of green energy vehicles also helps.
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Xpeng Motors Is The Latest Tesla China Rival After Nio
For investors who want to bet on the migration to clean energy of transportation, chasing sky-high EV stocks need not be the game. If you have been following our feeds, you would know that we have been covering Xpeng (XPEV Stock Report) even before it got listed. With the pace of its stock price appreciation, you could easily see Xpeng doubling in value by the end of this week. However, the stock appears to be taking a breather in pre-market trading, down 5.27% as of 5.48 am ET. The bulls were on the street because earlier this week, Xpeng Motors reported that October deliveries vaulted 229% and YTD deliveries grew 64%.
The company produces and sells premium electric vehicles including the G3 SUV and the P7 four-door sedan, which appears to be the rivals to Tesla’s Model Y SUV and Model 3 sedan. The Xpeng vehicles are also more affordable, with the basic version of the G3 starting at about $22,000 post subsidies. The company’s G3 SUV was among the top 3 Electric SUVs in terms of sales in China in 2019. When the company began production in late 2018, it did so via a deal with an established automaker. Since then it has started production at its own factory in Guangdong province in southern China.
The company also saw the completion of its first batches of the P7 sedan earlier than expected. Some may think that Xpeng is an underdog in what appears to be an increasingly crowded space. But it’s important to note that the Chinese EV market is the largest globally. Let’s not forget that different companies target different segments of the market and do not necessarily compete directly with each other. With the market there for the taking, XPEV stock is certainly worth a closer look.
NIO Stock Is Now Worth As Much As General Motors
Nio Inc. (NIO Stock Report) has been on our list of top EV stocks to buy since June 5 this year. The stock has since jumped more than 650%. After the meteoric rise in its share price, Nio is now worth more than the century-old automaker General Motors (GM Stock Report). The company is slated to report its earnings on November 17. However, the company has recently provided an update on its October delivery performance.
The largest US-listed Chinese EV maker reported on November 2 that it delivered 5,055 electric vehicles, which was up 100.1% over the amount last year. This represents significant monthly progress. The consistent strong deliveries over the past few months have certainly been very encouraging, Assuming history would serve as a good guide, with a conservative estimate, we could see an explosion in its revenue. Just to recap, Nio has achieved a positive operating margin this year. So with the increasing deliveries, you could guess where NIO stock is heading.
Investors also have to bear in mind that Nio will still deliver less than half the number of vehicles that Tesla is set to deliver this year. With Tesla’s forecast revenue to be $30.87 billion in 2020, which translates to a price-to-sales ratio of over 13 times. Some analysts expect Nio’s revenue to potentially reach up to $11 billion next year. Assuming the same price-to-sales multiple, Nio should have a market cap of nearly USD 150 billion. Given its current market cap of just over USD 57 billion, it implies an upside of more than 150% from its current price. If Nio continues in this growth trajectory, would you bet on NIO stock to continue its momentum?
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Li Auto, The Dark Horse Behind Xpeng And Nio?
Nio and Xpeng appear to be the investors’ choice when it comes to buying top Chinese EV stocks. But you might want to include Li Auto (LI Stock Report) on your watchlist too. The company’s stock price reached all-time highs on Thursday’s intraday trading. This came after the stock jumped more than 60% for the past month.
For the month of October, Li Auto delivered 3,692 of its Li ONE SUVs. That’s an increase from 3,504 units in September. Unlike cars from Nio and Xpeng, the Li ONE is a range extender electric vehicle. That means it has a small gasoline engine that can recharge the car’s batteries while the vehicle is moving. Arguably, it is not as green as a pure electric vehicle. But it does solve problems of range anxiety and the lack of charging stations in some locations. It would be the perfect product for those who have reservations about transitioning to electric vehicles.
With a strong focus on premium electric vehicles, the company is hitting the sweet spot in the world’s largest electric vehicle market. With the stock climbing to all-time highs, investors are also starting to pay close attention to this new EV player in the stock market. What’s more, as of the first half of 2020, Li Auto is the closest to profitability in comparison with Nio and Xpeng. With that in mind, would you consider adding LI stocks to your watchlist?
