NIO Stock – three Bubble Stocks Robinhood Buyers Maintain Chasing
2020 was an eventful 12 months for the stock market. It gave us the quickest bear market crash in historical past, a short flip destructive for West Texas Intermediate crude oil futures, and an all-time excessive for the CBOE Volatility Index in March.
Regardless of this record-breaking chaos, millennial and novice buyers have been unfazed. On-line investing app Robinhood, which has a median consumer age of solely 31, gained roughly three million new customers in 2020.
Nonetheless, Robinhood buyers have additionally developed fairly the popularity on Wall Street for chasing momentum, irrespective of how dear an organization was perceived to be. In current weeks, the next three bubble stocks have lured Robinhood buyers.
Arguably essentially the most hyped-up stock on Robinhood is electric-vehicle (EV) producer NIO (NYSE:NIO). As soon as an afterthought, NIO is now the third most held stock on the complete platform. It is worth noting that NIO retains rising the ranks of Robinhood’s leaderboard regardless of a virtually 1,600% return over the trailing 12 months by Jan. 13.
This overwhelming curiosity in NIO primarily ties into the mammoth long-term potential of EVs in China. By 2035, roughly half of all automobiles bought within the largest auto market on this planet might be various power. Since NIO relies in China, it doubtlessly provides geographic first-mover benefits.
Moreover, NIO‘s manufacturing has begun increasing at a fast tempo. NIO delivered 43,728 automobiles in 2020, however was on monitor for an annual run-rate of 84,000 EVs as of December. NIO‘s administration has beforehand stated that hitting an annual run-rate of 150,000 automobiles might be key in 2021.
The corporate additionally made waves with the introduction of its battery-as-a-service (BaaS) program in August. BaaS program enrollees pay a month-to-month membership charge in exchange for a decrease preliminary car value and the power to exchange/improve their EV’s batteries at a later date. This idea ought to assist enhance preliminary gross sales, create a gradual stream of high-margin residual cash movement, and enhance long-term buyer loyalty.
Whereas this most likely all sounds nice, Robinhood buyers appear to have neglected that NIO is a $97 billion firm that is solely produced a bit over 75,000 whole EVs since its inception. It is also, at minimal, two years away from having an opportunity to show the nook to profitability.
What’s extra, auto stock working margins are nothing to write down residence about. Whether or not we’re speaking about combustion-engine automobiles or EVs, the auto business is capital-intensive and yields mediocre margins, at greatest. Robinhood buyers are most likely going to remorse paying $97 billion for a still-nascent automaker.
After I say “bubble stock,” you most likely consider an organization that is ascended to jaw-dropping heights, like NIO. However the time period will also be utilized to beaten-down stocks which have rallied strongly off of their lows with out a lot reasoning. That is why Canadian marijuana stock Sundial Growers (NASDAQ:SNDL) makes the checklist.
At $0.66 a share, Sundial is each bit a penny stock. However since quadrupling from its late-October lows, Sundial has labored its means as much as the No. 18 spot on Robinhood’s most-held stocks, and it now has a market cap of greater than $680 million.
The current buzz about Sundial largely has to do with the election leads to the USA. President-elect Joe Biden‘s win in November and the 2 Democratic victories within the Georgia Senate runoffs in early January open the door for Congress to doubtlessly legalize marijuana on the federal degree. Take into account that an all-time file 68% of survey-takers in Gallup’s 2020 hashish ballot supported nationwide legalization.
There’s additionally pleasure about Sundial Growers addressing its debt and bolstering its cash place. Sadly, this constructive can also be one of many firm’s most blatant negatives. To pay down debt and lift capital, Sundial has bought shares of its stock and transformed a few of its debt to fairness. In plainer phrases, the corporate’s excellent share depend has ballooned larger, crushing the per-share value of its stock.
Sundial Growers occurs to be within the midst of an operational shift, too. Till not too long ago, it was dedicated to promoting low-margin wholesale hashish. It is within the means of shifting its focus to retail pot gross sales, however is producing some ugly year-over-year comps because it transitions. Web gross sales within the September-ended quarter have been greater than halved from the prior-year interval.
The purpose is, Sundial is nowhere close to recurring profitability, and the corporate has proven little regard for its shareholders. It is time for Robinhood buyers to maneuver their cash elsewhere within the hashish house.
Lastly, Robinhood buyers are positively being a bit bubbly by chasing after hydrogen fuel-cell options firm Plug Energy (NASDAQ:PLUG). Identical to NIO, Plug Energy has skyrocketed by 1,600% over the trailing 12 months.
Plug Energy is on fireplace for plenty of causes. For starters, buyers are clearly enthusiastic about various power options, particularly with local weather issues rising. The incoming administration within the U.S. is predicted to advertise renewable power choices, which very nicely may embrace hydrogen gas cells.
Second, the corporate’s large warrant guess again in 2017 seems to be paying off. Plug Energy provided warrants to Amazon and Walmart, with the situation that they’re going to vest primarily based on the quantity of hydrogen know-how orders positioned. Given Plug’s hovering share price, Amazon and Walmart now have additional incentive to buy GenDrive-powered forklifts.
Third, Plug Energy has landed two very large offers early in 2021. On Jan. 6, South Korea’s SK Group took a 10% stake within the firm worth $1.5 billion on the time. This strategic partnership is meant to develop and roll out hydrogen gas cell know-how in automobiles in South Korea. Not even every week later, Plug signed a memorandum of understanding with French automaker Renault to create a 50-50 three way partnership focusing on vital fuel-cell share in Europe’s gentle industrial car market.
There is not any query that these are large steps ahead for Plug Energy. Then once more, we’re speaking about an organization that hasn’t demonstrated the power to generate a recurring revenue in over twenty years as a public firm. Even for aggressive development buyers, 73 occasions Wall Street’s projected gross sales in 2021 might be excessive.
It is also unclear how seamless hydrogen gas cell adoption might be in South Korea and Europe. I count on these joint ventures will encounter unexpected challenges that are not but mirrored within the firm’s almost $33 billion market cap.
NIO Stock – three Bubble Stocks Robinhood Buyers Maintain Chasing