Better Electric Vehicle Stock: NIO vs. Canoo

NIO Inc. (NIO) and Canoo Inc. (GOEV) are two fast-growing players in the electric vehicle (EV) space. Based in China, NIO manufactures and sells smart and connected EVs. The company’s products include its EP9 supercar and its ES8 7-seater SUV. GOEV, which headquartered in Torrance, California, is a mobility technology company that designs, engineers, develops, and manufactures EVs for commercial and consumer markets in the United States.

According to  Grand View Research, demand in the global EV market is expected to witness a CAGR of 41.5% from 2020 to 2027. As such, both NIO and GOEV are expected to see greater demand for their vehicles in the coming months.

While NIO has returned 1325.2% over the past year, GOEV has gained 48.1%. In terms of past-three months’ performance, NIO is a clear winner with 101% returns versus GOEV’s 46.9%. But which of these two stocks is a better pick now? Let's find out.

Latest Movements

NIO launched its first autonomous driving model, NIO ET7, a smart electric flagship sedan on January 9, 2020--NIO Day 2020. The ET7 features NIO’s latest NIO Autonomous Driving (NAD) technology, which includes  NIO Aquila Super Sensing and NIO Adam SuperComputing. In November, the company announced the launch of its 100-kWh battery together with battery upgrade plans.

The company’s China headquarters, located in Hefei, was officially opened on October 9, 2020, which marks an important milestone in the development of NIO China. On September 26, 2020, NIO set up its NIO House at the Beijing International Automotive Exhibition 2020. The company officially launched its  Battery as a Service (BaaS) in August 2020. NIO’s BaaS is a breakthrough innovation in both technology and business models.

Meanwhile, GOEV announced this month that Kamal Hamid has joined as Vice President of Investor Relations, effective immediately. And in October, the company announced the appointment of Tony Aquila as the Executive Chairman. In December, GOEV unveiled its all-electric multi-purpose delivery vehicle, Recent Financial Results

NIO’s total revenues surged 146.4% year-over-year to $666.60 million for the third quarter ended September 30, 2020, driven by high vehicle sales.

NIO’s revenue from vehicle sales have increased more than 146% year-over-year to $628.43 million. Its vehicle margin was reported to be 14.5%, compared to a negative value in the third quarter of 2019. Its gross profit increased 87.1% sequentially to $86.28 million, yielding gross margin of 12.9%. For the three months ended December 31, 2020, NIO delivered 17,353 vehicles, representing 111% year-over-year growth, exceeding the quarterly guidance.

GOEV made its debut as a publicly traded company on December 22, 2020 following the completion of a reverse merger with Hennessy Capital Acquisition Corp. IV. (HCAC). In the words of Daniel J. Hennessy, Chairman & CEO of HCAC, “We are excited to see this merger successfully realized and congratulate Canoo on this milestone. Our commitment to sustainable technologies and infrastructure is resolute, and Canoo is a fitting long-term partner as we usher in a new era for urban mobility with innovative and affordable EVs.” On December 22, 2020, GOEV began trading at $22.75 per share.

Thus, NIO is in a more advantageous position.

Expected Financial Performance

Analysts expect NIO’s revenue and EPS to increase 99.8% and 49.2%, respectively, in 2021. In comparison,  GOEV’s revenue and EPS are expected to increase 2042.9% and 42.7%, respectively in 2021.

POWR Ratings

While NIO is rated Buy in our proprietary POWR Ratings system, GOEV is rated Sell. Here are how the four components of overall POWR Rating are graded for NIO and GOEV:

NIO has an A for Trade Grade, and a B for Buy & Hold Grade, Peer Grade and Industry Rank. It is currently ranked #15 of 103 stocks in the China industry.

GOEV holds a D for Trade Grade, Buy & Hold Grade and Peer Grade, and an A for Industry Rank. It is currently ranked #48 of 55 stocks in the Auto & Vehicle Manufacturers industry.

The Winner

GOEV is still in a start-up  stage and is witnessing greater volatility. As  a much more established company, NIO appears to be a better buy based on its superior financials.

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NIO shares were trading at $57.41 per share on Friday afternoon, down $0.96 (-1.64%). Year-to-date, NIO has gained 17.79%, versus a -0.93% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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