NIO (NYSE:NIO) has had a outstanding run, with shares of the Chinese language electric-vehicle (EV) maker up greater than 1,680% over the previous yr. This soar is probably going as a consequence of rising pleasure concerning the ongoing automotive revolution and NIO‘s function in making it world.
There’s nice potential in NIO, however the stock has lots of that potential already baked in. NIO is valued by the market at greater than $90 billion, or greater than 30 occasions gross sales. That is fairly frothy for an organization that delivered 43,728 autos in all of 2020.
It’s actually doable NIO will shortly develop into that valuation, however buyers shopping for in in the present day want to grasp that’s not a given. Whereas respecting NIO‘s potential, three Fools consider Hyliion Holdings (NYSE:HYLN), Ford Motor (NYSE:F), and General Motors ((NYSE:GM)) are higher buys proper now, and this is why.
A start-up embedded with the incumbents
Lou Whiteman (Hyliion): Hyliion, like NIO, is a part of a era of latest corporations pushing to hurry the electrification of autos. However the firm is much from an “all or nothing” kind of guess and is nicely positioned to thrive in a world the place the newcomers make their mark. Nonetheless, the dinosaur incumbent automakers are nonetheless a serious pressure.
Hyliion is targeted on heavy vans, however in contrast to Nikola, it is not making an attempt to interchange the prevailing fleets. Slightly, it’s making an attempt to insert its various powertrain into the present provide chain and provide an answer that may permit vans already on the highway to go inexperienced.
The corporate has two merchandise. Its first, which is already in manufacturing, turns an present diesel tractor-trailer truck right into a extra environment friendly hybrid. The second is a full powertrain that consists of electrical motors and a small battery pack, together with a generator powered by pure fuel that retains the battery topped off.
Hyliion can also be extra of a design and engineering store than a producing operation. It has no manufacturing unit of its personal; as an alternative, it is partnering with well-regarded auto-parts maker Dana to fabricate merchandise and ship them on to clients.
Hyliion was considered one of quite a few auto-related corporations to go public in 2020 by way of a merger with a particular objective acquisition firm (SPAC). The stock acquired caught up within the frenzied shopping for of SPACs final yr, however the shares are off greater than 60% for the reason that starting of September.
That is removed from a positive guess, however Hyliion has an enormous addressable market, a product that solves lots of points for fleet managers with out forcing them to interchange all of their present vans, and greater than $500 million within the bank to fund operations because it ramps up.
It is a enterprise that has the muse wanted to be a long-term progress story.
This previous automaker will thrive within the new battery-powered world
John Rosevear (Ford Motor Firm): I will admit proper up entrance that I have been a fan of NIO for some time. However like plenty of new electric-vehicle makers, its stock is now wanting fairly richly priced. Provided that actuality, I feel this can be a nice time to take a second take a look at the so-called “legacy” auto corporations.Apple-converted-space”>
Among the previous dinosaurs — some — are making the precise strikes not solely to adapt however to search out bottom-line progress because the world transitions to zero-emissions autos.Apple-converted-space”>
Ford is a kind of corporations. Whereas Ford nonetheless generates the majority of its earnings from vans and SUVs powered by internal-combustion engines, it has spent the previous few years making ready to protect (and even develop) its share of these EV markets as inside combustion falls by the historic wayside. CEO Jim Farley, who took the highest job in October, has already begun accelerating that transition with a watch to boosting Ford’s profitability.
Can an previous firm like Ford construct an incredible electrical automobile? That query was an excellent one as lately as a yr or two in the past, however it has been resoundingly answered by the brand new Mustang Mach-E (learn any assessment to see what I imply). There are numerous extra electrical Fords on the way in which, together with battery-powered variations of two of its most worthwhile merchandise — the F-150 pickup and Transit industrial van. Each are anticipated to reach over the subsequent yr or so.Apple-converted-space”>
Ford additionally has a giant stake in one of the vital promising autonomous-vehicle start-ups — Pittsburgh-based Argo AI — and plans to roll out hands-free driving on the Mach-E and a number of other different models later this yr.Apple-converted-space”>
Better of all, Ford remains to be pretty low cost, buying and selling at simply 10 occasions its anticipated 2021 earnings. And whereas its dividend was suspended final spring amid the COVID-19 pandemic, it is more likely to return quickly, offering one other incentive to purchase and maintain the shares.
You might need to be affected person, however I feel there is a good likelihood that Ford’s stock will outperform the market by a pleasant margin as auto buyers catch on to its story.Apple-converted-space”>
GM is objectively higher than Nio
Wealthy Smith (General Motors ): I might in all probability identify a dozen stocks — simply off the highest of my head — which might be higher than China’s Nio. However as an alternative, I will simply identify one: General Motors .
In any case, what precisely will we imply after we say “higher than Nio?” Are we speaking concerning the measurement of the enterprise? With $115.eight billion in trailing gross sales, GM is greater than 60 occasions larger than Nio. Or are we speaking about profitability? GM solely earns about 4.Four cents for each $1 in gross sales in makes, however that also added as much as $3.Four billion in revenue over the past 12 months. In the meantime, for each $1 in gross sales Nio information, it loses $0.52 — and Nio misplaced $1 billion over the past yr.
Granted, NIO may be rising its gross sales quicker than GM. Gross sales on the Chinese language EV maker greater than doubled via the primary three quarters of 2020 in comparison with the primary three quarters of 2019. However till Nio proves that it will possibly earn a revenue on these gross sales, it is going to be more durable to discover a firm that is worse than Nio than to search out one which’s “higher.”
One factor’s for positive: At a valuation of solely 18.9 occasions trailing earnings and simply 0.55 occasions gross sales, GM stock is actually cheaper than Nio! (For that matter, with the S&P 500 presently promoting for 38.Three occasions earnings, GM prices half as a lot as most stocks.)
And if you need probably the most apples-to-apples comparability of all, right here it’s: In Q3 2020, General Motors and its three way partnership associate bought 55,781 items of their Hong Guang Mini electrical automobile in China. Nio delivered fewer than 45,000 automobiles all yr. By that almost all goal of all requirements, GM stock is clearly doing higher than Nio.