Two of the most popular stocks in the world right now are electric vehicle makers Nio and Tesla. Together they trade around 200 million shares a day, largely thanks to young individual investors who are starving for part of the action.
But these stocks are definitely not the same. Tesla
The company, which went public at just $ 17 per share more than 10 years ago, has gone through the Wall Street wringer while Nio
debuted in US markets a little over two years ago. Tesla is US-based, has an iconic following in American auto culture and a quirky CEO, while Nio is a Shanghai-based EV company that doesn't have the same amount of fireworks around its brand.
Both picks have great long-term potential as they are the key players in the long-term growth of the electric vehicle market. But if I had to pick just one to buy at that price and hold it for all of 2021, my money at Nio would be over Tesla.
The second offer from Nio was well timed and appropriate: Some investors planned Nio's most recent secondary offering in December as a blatant cash robbery to capitalize on its skyrocketing share price.
Basically, there are public markets where companies can raise capital to keep growing, and Nio's $ 2.6 billion profit was the right move at the right time. Nobody put a gun to anyone's head and charged them $ 39 a share. That was a fair price – and in fact more than 7% below the market price at the time.
If you hate secondary offerings, you hate Tesla too: Doesn't anyone remember a similar move by Tesla less than a year ago, when the company raised $ 2 billion on shares priced at $ 767 (pre-split)? Or a second offer of $ 2.7 billion and bond issuance in 2019? Or how about an SEC filing in September where Tesla will "from time to time" and "in the market" sell even more shares to keep raising money? Followed by the $ 5 billion it raised this month?
If you think Nios' alleged stock dilution is a death knell, it's time to check out Tesla's headlines.
Tesla is not an abbreviation for electric vehicles: As an analyst at Roth Capital Partners said in November, “Tesla is an umbrella stock,” tied to all other names in the industry.
I'm not denying this, but I don't see it as a good thing. It is certainly more directly related to the introduction of electric vehicles than an older automaker like Ford Motor
That is still far behind the pack. It's dangerous to believe that more EV sales definitely mean ever-increasing market value for Tesla.
Powerhouses like Google split up at the tech bubble
from pretenders like theGlobe.com
Eventually the markets will stop buying the trend and look at individual stocks. That could be dangerous for Tesla given its sky-high rating.
Read: Tesla, joining the S&P 500, is the mother of all stock market events
Tesla still has a long way to go in China: Although there was a lot of buzz about Model 3 vehicles made in China, Tesla only sold about 21,600 cars in November. That was good enough to be number 3 in market share, but certainly not the trailblazer – and less than a third of the monthly run rate needed to forecast 880,000 Chinese-made EVs by the end of next year.
Where's Tesla's China Blast ?: Total electric vehicle sales in China are in line with expectations. The number in November increased more than 130% to 169,000 units. While Tesla dominates the U.S. market, its 21,600 units sold in China are a tiny sliver in a crowded field. Additionally, China's raw growth rate for Tesla may be impressive with 45% more vehicles sold compared to 15,000 vehicles sold in June, but it's really hard to be excited about nearly 6,000 more vehicles produced after six months, when The inventory reached is worth more than $ 600 billion.
Nio's growth is real, on a smaller basis: Admittedly, Nio has only delivered 36,700 vehicles in 2020. But that's more than 110% more than 2019 – and investing aggressively to keep increasing production.
While Tesla's growth in China has to be digested as part of an established multinational in the US and Europe, Nio can seize the opportunity in China directly. If you remember the early days of Tesla, the EV maker sold people with the promise that 30,000 shipments could grow to 300,000 in just a few years – and Nio seems to have that growth plan too.
Read: Worldwide sales of electric vehicles are expected to increase by 50% in 2021
Nio has ties to state allies: Recently, Nio signed a contract with State Grid Electric Vehicle Service Co., part of China's massive state utility company. The plans are modest – to collectively build only about 100 charging and EV filling stations by 2021 – but show that Nio is doing what all successful Chinese stocks must do, namely gaining the favor of state-owned allies to keep their business going expand and squeeze our competitors.
The Tesla factory is 100% US-owned – and while Chinese banks have provided the $ 1.4 billion loan for the facility, this is very different from doing business with partners in Beijing.
Nio doesn't have a Tesla hype machine: There is no middle ground on Tesla. Currently, Goldman Sachs has a target price of $ 780 on the stock, while JPMorgan Chases is $ 90. Hedge fund icon Jim Chanos recently aptly published it on Bloomberg TV and said Tesla is "worth anything people want to believe Elon Musk touts".
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If you like this type of meta-investment and are trying to think about what other people think of what Musk thinks, then focus on Tesla. For many investors looking to cut the noise and simply capitalize on the growth potential of electric vehicles in China, Nio is an option that bypasses some (though admittedly not all) of the hysteria common in Tesla these days.
Jeff Reeves is a MarketWatch columnist. He has no shares in Tesla or Nio.
Also read: In addition to Tesla and Nio, 20 electric vehicle analysts expect them to grow the most in the next year
And: 20 of analysts' favorite large-cap stocks for 2021, including GM, Facebook, and Salesforce