NIO and TESLA are two growth stocks that have experienced very hard falls lately. Since rising to $900 in January, Tesla has fallen to $620, a decline of over 30%. Meanwhile, after rising to $66 in January, NIO has fallen to $39, a decline of 40%. However, over the last year, Tesla is still up around 330% while NIO is up 950%. Is this latest share price weakness a good opportunity for me to buy these electric vehicle shares? Let’s take a look a deeper dive...
So I will start with the things I like about these EV powerhouses. For starters, they operate in a high growth tech. There’s no doubt the global electric vehicle market is set for monster growth over the next 10 years. We expect the market is set to be worth a whopping $800 billion by 2027, up from $250 billion last year. In China, EV sales could rise 40% this year to reach 2 million cars. This kind of growth is likely to provide huge tailwinds for companies including NIO and Li Auto In China.
Also, unlike many other EV start-ups, both Tesla and NIO are already delivering vehicles. And the numbers are impressive. Last year, Tesla delivered 499,500 vehicles, up 36% year on year, while NIO delivered 43,728 vehicles, up 113% year-on-year. These figures show both companies are growing at a stupendous rate!
However, I do have some niggles about these stocks. The first is around their competitive advantages, and if they protect their market share? More traditional automakers are now getting serious about EVs. Volvo, VW, Ford, and many other big players are now getting in on the act. In China, Tesla and NIO face also have competition from leading domestic automaker SAIC Motor, which has partnered with GM build a $4,500 mini EV Recently.
My second concern is that even after the recent share price pullbacks, these stocks still look expensive. Tesla’s market-cap is around $600bn, valuing the company at $1.2m per car sold last year. NIO’s market-cap is about $62bn, valuing the company at around $1.4m per car sold. However we know that the money is being invested into he future of these great companies so we should be careful to not let these valuations put us off.
So in summary, Tesla and NIO are STILL BUYS for me right now. Their growth is impressive, and this healthy correction provides the perfect time to top up my portfolio.