Shares of Tesla Inc. and Nio Inc. rallied Thursday, after Mizuho analyst Vijay Rakesh recommended investors buy the respective leaders in their electric vehicle markets, while setting bullish price targets.
Tesla’s stock TSLA,
Rakesh initiated coverage of Tesla with a buy rating, making him one of just 11 of 35 analysts surveyed by FactSet who are bullish. He set a stock price target of $775, which is 12% above current levels. The average target of analysts surveyed by FactSet is $631.71.
Rakesh said Tesla is a “100-year disruptor driving an electric future” for the light vehicle production (LVP) market. He said it isn’t just EV production that gives Tesla “defensible EV leadership” in the global market, the company’s advanced battery and advanced drive assistance systems (ADAS) also provide a moat.
“Tesla drives the tip of the spear in battery development for EVs,” Rakesh wrote in a note to clients.
“With Tesla’s cutting-edge battery technology driving key leadership in the EV market and providing sustainable energy storage for residential and industrial applications, disrupting the global energy market, we see [Tesla] as a leader for the next decade and beyond,” Rakesh wrote.
With less than 1% share of the global LVP market, he believes Tesla has room for “significant” growth, as EVs are expected to grow to 25% of global LVP by 2025, compared with current share of 3% to 4%.
The bullish call comes after a volatile period for Tesla’s stock, which recently entered a “bear market” for the third time in a year, then enjoyed its biggest one-day gain in more than a year earlier this week.
For Nio, Rakesh started coverage with a buy rating, and set his price target at $60, which is 32% above current levels. Rakesh becomes one of 11 of 19 analysts surveyed by FactSet who are bullish, but his price target is the lowest of those in the bullish camp.
“Nio has a key differentiation from peers: a premium EV offering with a lower cost of ownership through its novel Battery-as-a-Service (‘BaaS’) battery swap module,” Rakesh wrote.
Inside a NIO ES6
Nio Inc.
He noted that Nio’s BaaS program enables a 5-to-10 minute battery swap for customers, while maintaining eligibility for China’s national subsidies. That cuts upfront buying costs for customers by 35% to 50%.
“While Nio is focused on the premium EV segment, a China subsidy and an innovative BaaS program make Nio’s cars eminently affordable compared to competing brands, such as Tesla,” Rakesh wrote.
Also read: Forget Nio and XPeng. This company and Tesla will be the top two electric-vehicle plays by 2025, says UBS.
With a small 0.1% share of the global LVP market, he believes Nio has significant growth potential as it expands in China, into Europe in the second half of 2021 and potentially into other markets.
Nio’s stock has also been volatile of late, as after more than doubling in the fourth quarter, and running up another 17% in January, it reached a record close of $62.84 on Feb. 9. It has pulled back sharply since then, closing Wednesday 34.2% below its record.
Despite recent volatility, Tesla’s stock has still soared 445.5% over the past 12 months and Nio shares have rocketed 1,266.6%, while the S&P 500 has advanced 43.9%.
