Market manipulator and the world’s number one insider trader Goldman Sachs just lowered its rating on NIO stock from a Hold to a Sell and assigned a $7 price target. Nervous longs read that Goldman Sachs said Sell and dumped their shares, pushing the price down 15% to $11 a share.
For those new to trading, this is what Goldman Sachs does. They take advantage of market opportunities to make money for their OWN account. Last week, Goldman Sachs reported its second-highest quarterly revenue ever, at $13.3 billion. The company makes its money trading AGAINST retail investors and not FOR retail investors. Just look at Goldman’s stake in NIO stock.
Furthermore, Goldman Sachs analysts have a history of wrong calls. Last June, in a note to clients, analyst David Tamberrino lowered his price target on Tesla to $158 from $200, his fourth downward revision of 2019, warning that his many of his peers on Wall Street are “too optimistic” in how they model the company’s delivery volumes.
How do you think investors are doing right now if they listened to Goldman Sachs?
Meanwhile, how do you think Goldman Sachs has fared in Tesla stock? The key to understanding Goldman Sachs is not listening to its analysts, but watching what the firm does with its own capital.
Tesla bottomed on the Goldman Sachs call and has been on a relentless bull run ever since. We believe the same will happen with NIO stock. For those that know and understand the company, NIO is no ordinary Chinese company. It’s the Telsa of China.
About NIO Stock
First up, before we get into the investment case for NIO stock, here’s a little background info on the company. NIO Inc. is a pioneer in China’s premium smart electric vehicle market. NIO designs jointly manufacture and sell smart and connected premium electric vehicles, driving innovations in next-generation technologies in connectivity, autonomous driving, and artificial intelligence.
NIO began deliveries of the ES8, a 7-seater high-performance premium electric SUV in China in June 2018, and its variant, the six-seater ES8, in March 2019. NIO officially launched the ES6, a 5-seater high-performance premium electric SUV, in December 2018 and began deliveries in June 2019. NIO officially launched the EC6, a 5-seater smart premium electric Coupe SUV, in December 2019 and plans to commence deliveries in 2020.
NIO announced via WeChat on July 18 that its 50,000th mass-produced vehicle roll off the production line at the JAC-NIO Advanced Manufacturing Center in Hefei, only 783 days after the first one coming out.
China Automotive Technology & Research Center (CATARC) reported that the insurance registrations of NIO-branded vehicles climbed 10% month over month to 3,720 units in June, including 2,464 ES6s and 1,256 all-new ES8s. For the second quarter of the year, there were 10,229 consumers in China buying the mandatory liability insurance for NIO’s vehicles, an increase of 168% over the previous quarter.
$1.5 Billion Credit Line
A strong sales report from Nio helped to clear the way for a $1.5 billion credit facility. The participating banks are China Construction Bank, ICBC, Bank of China, Agricultural Bank of China, Industrial Bank, and China Merchants Bank, according to Bloomberg. This firmly removed any bankruptcy risks for investors in NIO stock.
NIO is set to announce the price and technical configurators of its third production model, the NIO EC6, at the forthcoming Chengdu Motor Show 2020, and afterward start delivering the vehicle in September. Unveiled at the NIO Day Event held on December 28, 2019, the EC6 is deemed as the coupe version of the ES6 SUV. This is another catalyst that will drive shares of NIO stock higher over the next few weeks.
Why NIO Stock Will Dominate Over Tesla In China
The biggest market in the world for electric vehicles is in China. It’s why Tesla is so focused on China with its Giga Shanghai factory. However, we don’t think the Chinese government will allow a foreign brand to dominate the domestic market. It would hurt their national pride to see Tesla succeed. That’s why NIO stock is the much better bet in the long-run. NIO also has backing from the Chinese government, so it’s not only in their national interest but also their financial interest for NIO to beat Tesla in the world’s largest EV market.
Furthermore, the subsidy to purchase EVs under 300,000 yuan does not apply to manufacturers that use swappable batteries. Tesla does not use swappable batteries, while NIO does. Under this new policy, NIO is the biggest beneficiary as they are the only premium EV company with battery swap services. All future premium models (price above 300,000 yuan) developed by NIO that come with swappable batteries are still eligible for the subsidy.
In terms of comparison, Nio Inc sports a valuation of just $12 billion compared to Tesla’s $251 billion market cap. In Q2, Nio delivered 10,331 electric SUVs compared to Tesla delivering 90,650 vehicles in Q2. If you value NIO Inc on a per-car delivery basis with Telsa, it should have a current market cap of $26 billion, or a $26 share price today.
It’s important for traders and investors to always look at the big picture first. When it comes to NIO stock, electric vehicles in China are the future. The Chinese government wants its citizens to drive electric vehicles. With a current population of 1.393 billion, how many car sales do you think this will create?
It’s foolish to bet against NIO stock. Unfortunately, there are plenty of fools out there and 15% of the float is now short. They are going to get squeezed.
When it comes to Goldman Sachs and old Wall Street, ignore the noise. Don’t listen to Goldman Sachs or another brokerage tell you what to do with your money. For that matter, don’t listen to us. Just use your own common sense. That common-sense thou tells us that NIO stock is heading much, much higher.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NYSE:NIO or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article.
Image courtesy of NIO