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NIO Stock Alert: One Big Reason EV Maker Nio Is Plunging Today

As all eyes turn to Chinese stocks today, Chinese electric vehicle (EV) producer Nio (NYSE:NIO) is in the spotlight. Indeed, as NIO stock slides, investors…

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As all eyes turn to Chinese stocks today, Chinese electric vehicle (EV) producer Nio (NYSE:NIO) is in the spotlight. Indeed, as NIO stock slides, investors are left to ponder the news coming out of the Securities and Exchange Commission (SEC) as well as what it might mean for the EV industry as a whole.

Source: Sundry Photography / Shutterstock.com

So, what is this big news?

Chinese stocks that trade on major U.S. exchanges have been sliding since markets opened this morning, a direct result of the recent news from the SEC. The regulatory agency has announced that it will be implementing a new law that will require all international companies that trade on the NYSE or Nasdaq to turn over their financial books to U.S. regulators upon request or face being delisted.

One major stock has already delisted and others seems poised to follow. These events have cast a cloud of uncertainty over markets, and investors have many questions about their Chinese investments. Investors have a lot to think about as NIO stock falls, in terms of the future of both the company and its industry.

What’s Happening With NIO Stock

Like most China-based companies that trade in the U.S., NIO stock has been falling all day. As of this writing, it is down by almost 9%. Despite an earlier uptick, it isn’t showing signs of rebounding. The stock has been declining since December began, but yesterday’s news has caused it to plunge, pulling it into the red by more than 20% for the month. It’s clear that since news broke of Chinese ride-sharing giant Didi Global (NYSE:DIDI) making the move to delist from the NYSE, investors are nervous, bracing for a selloff.

Nio isn’t the only Chinese EV manufacturer that hasn’t been enjoying the ride today. Its peers XPeng (NYSE:XPEV) and Li Auto (NASDAQ:LI) have seen worse declines. Both are down as of this writing, by 9% and 13%, respectively.

Why It Matters

While this news has sent Chinese stocks across many different sectors into a downward tailspin, there are other factors that are worth considering. Nio filed for an additional listing on a Hong Kong exchange in early 2021, but the decision was delayed for months, stretching into 2022 with little information provided by the company as to the reasons behind it. If the company was already planning to list in another market, this news from the SEC could prove the incentive it needs to delist in order to expedite the process. It’s hard to pinpoint exactly what this means for NIO stock.

Wall Street hates uncertainty. And since an important international company decided to comply with unprecedented orders from its government, uncertainty has reigned supreme. Nio’s incentive to delist is likely high, and if one industry leader makes a decision, others may follow. Adding to the turbulent market outlook is the fact that many Chinese business leaders haven’t said much since news broke of the SEC’s decision, leaving investors to wonder what the immediate future will look like.

The fact that Chinese EV stocks are slipping across the board indicates that this news is serious. The EV race, in which China’s companies have played a key role, has come to define investing in 2021 and looks set to continue into the new year. If such a prominent sector can feel the strain of this news, no industry is immune.

What It Means

The road ahead looks bumpy for all Chinese stocks that trade on U.S. markets, not just the EV sector. The emerging threat of the omicron variant was already casting doubt over markets, as investors braced for what will likely be known as the “omicron winter.” Now they have an even shorter-term concern to field.

With all this in mind, there are plenty of factors that contribute to a stock making the move to delist. We don’t know for sure what this news will mean for NIO stock, but it is certainly a name to watch as Chinese companies make decisions and trends start to develop.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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Energy & Critical Metals

Capstone Green Energy Bags 3.4 MW Renewable Energy Contract In California

Capstone Green Energy Corporation (Nasdaq: CGRN) shared today a renewable energy project secured by its distributor, Cal Microturbine. The contract
The…

Capstone Green Energy Corporation (Nasdaq: CGRN) shared today a renewable energy project secured by its distributor, Cal Microturbine. The contract seeks to provide a 3.4 MW microturbine-based system for an unnamed customer in California.

No financial details have been shared but the firm said the system will consist of three Capstone Green Energy C1000S Signature Series microturbines and one C400S Signature Series microturbine, and are expected to use 100% renewable fuel.

“This order is indicative of the shift we are seeing to more renewable fueled energy projects in recent years,” said Capstone VP of Marketing and Distribution Jen Derstine. “In fiscal 2019, renewables made up 7% of our overall business and in fiscal 2021 they made up 13% of our business.”

The company also said that the customer “initially considered leveraging reciprocating engines” but eventually went with Capstone’s microturbines “for low emissions and low life cycle costs.”

Capstone Green Energy last traded at $3.28 on the Nasdaq.


Information for this briefing was found via the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post Capstone Green Energy Bags 3.4 MW Renewable Energy Contract In California appeared first on the deep dive.

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Energy & Critical Metals

Quantumscape Could Be Cheap Here From Stationary Energy Battery Sales

Quantumscape (NYSE:QS) is now well off of its highs, trading at $17.30 per share as of Thursday, Jan. 20. A month ago when I wrote about QS stock, it…

Quantumscape (NYSE:QS) is now well off of its highs, trading at $17.30 per share as of Thursday, Jan. 20. A month ago when I wrote about QS stock, it was at $23.57 per share. As a result, Quantumscape has fallen by $6.27 per share to $17.30, a drop of 26.6% in the last month.

The entrance to QuantumScape Headquarters QS stockSource: Tada Images / Shutterstock.com

At the time I wrote that Quantumscape, the lithium metal battery maker, was a bargain. As a result, that makes it an even better investment find this month. After all, since closing at $22.19 on Dec. 31, QS stock is already down 22% since the end of 2021.

As a result, QS stock is likely to be fairly volatile, especially until the company starts booking revenue.

Where Things Stand For Quantumscape

Investors still seem to be concerned that Quantumscape won’t start making any revenue until 2024 with its existing solid-state battery technology. This is based on page 28 of the company’s September 2020 investor presentation.

Based on these projections, which don’t seem to be in its August 2021 investor presentation, the company will have just $14 million in revenue by 2024. Next, in 2025, its projection is for $39 million.

In fact, it’s not until 2026 that Quantumscape will make any really significant revenue. The 2020 presentation shows its forecast for that year predicts sales of $275 million. The problem is that this is still five years from now.

That is a long time for investors in Quantumscape to wait for any kind of financial prospects for the company. That likely accounts for the high volatility in QS stock, at least in the past several months.

Moving Into Stationary Energy Uses

On Jan. 13, Quantumscape announced a new partnership that will allow it to produce batteries for more than electric vehicles (EVs). Its deal with Florence Energy (NASDAQ:FLNC) will allow it to introduce its solid-state batteries for stationary energy storage applications.

This is a whole new area that will open up large markets for Quantumscape, including utilities (battery-based storage on the electric grid.) The two companies will validate and test QuantumScape solid-state battery cells to be used in Fluence’s stationary storage products.

As Barron’s points out, batteries are also being used by utilities to help make renewable power generation available 24/7 by storing wind and solar energy.

Moreover, based on recent studies, the market for stationary energy products could be as much as $385 billion by 2030. If the company can garner even a 1% share in that business, its annual revenue will be $3.85 billion. That goes a long way toward justifying Quantumscape’s $8.24 billion market capitalization as of Jan. 20.

Valuing QS Stock

For example, let’s say it can produce $5 billion in sales from stationary energy by the end of 2030. Including 2022, that is nine years from now, and at a 10% annual discount rate, the present value factor is 42.4%. That implies the present value of $5 billion nine years from now is $2.12 billion today.

As a result, that puts the stock on an adjusted price-to-sales (P/S) multiple of just 3.88 times. This also does not include its expected revenue from EVs by the time.

According to its 2020 slide deck, the company expects EV revenue of $6.49 billion by the end of 2028, or seven years from now. With a present value factor of 51.31%, the present value of that EV revenue is $3.33 billion. So, including the $2.12 billion in stationary power revenue,  the total present value is $5.45 billion.

As a result, the present value P/S multiple is just 1.5x revenue. That is a very cheap price. Granted, this involves a lot of forecast revenue and major assumptions.

For example, if we set the discount rate to 15%, the present value of both streams of revenue works out to $3.86 billion ($1.42 billion for the stationary energy part and $2.44 billion from EVs.) That raises its P/S ratio to 2.13 times. This is still very cheap.

Where This Leaves Investors in QS Stock

The bottom line seems to be if you can stand the volatility, QS stock looks pretty cheap here. The fact that the company is now expanding into a new line of revenue could help it bring forward revenue earlier than from EVs.

That could also help reduce the volatility in the stock going forward. Nevertheless, investors in QS stock are going to have to be patient. They should expect a bumpy ride, but at least the company is trying to make its future revenue sources look more secure.

On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.

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Energy & Critical Metals

Lucid Stock Still Looks Like a Bargain Here as Its EV Production Ramps up in 2022

Lucid (NASDAQ:LCID) has declined quite a bit from its peak price of $55.52 on Nov. 16. LCID stock is now down slightly over 30% to $38.72 per share as…

Lucid (NASDAQ:LCID) has declined quite a bit from its peak price of $55.52 on Nov. 16. LCID stock is now down slightly over 30% to $38.72 per share as of Jan. 20.

A Lucid (LCID) Air displayed in its own vitrine in Madison Square Park in New York. Lucid Motors started trading on the NASDAQ exchange via a SPAC merger.Source: rblfmr / Shutterstock.com

But the good news is that LCID stock has risen since its special purpose acquisition corporation (SPAC) merger deal closed in July 2021. That is effectively when the luxury electric sedan maker went public on the NASDAQ through a reverse merger with the SPAC.

Now that the company is public it has a lot of cash on hand to help finance its electric vehicle (EV) production ramp. For example, Lucid had over $4.8 billion in cash at the third quarter’s end. It also raised an additional $1.75 billion in convertible senior notes on Dec. 9.

So, depending on how much cash it burned in the fourth quarter, the company could have about $6 billion in cash or slightly more at the end of 2021. Based on its cash burn rate forecast, there will be plenty of cash left for its production ramp up over the next two years.

Where Things Stand With Lucid

For example, Lucid expects to deliver 49,000 EVs in 2023, up from 20,000 in 2022, according to page 65 of its slide deck presentation. That will produce $2.219 billion in revenue in 2022 and $5.532 billion by the end of 2023.

Moreover, page 9 of Lucid’s earnings slide deck shows its cash burn rate was $1.044 billion in the last nine months. It’s probably higher than that now, as production has started to ramp up in Q4. In addition, Lucid’s chief financial officer has indicated that its capital expenditure (capex) spending will be much higher in 2022. In fact, it will “pull forward” $350 million of future capex spending in 2022.

As a result, the CFO said it will have enough cash to get through 2022. This is probably because the ramp-up process will eat up a lot of cash, although revenue will still not be profitable in 2022 and at least part of 2023.

Moreover, the company will likely have plenty of opportunities during 2022 to raise additional debt capital. This is what Tesla (NASDAQ:TSLA) did when it first ramped up its production five years ago. So analysts are probably not worried about the company’s ability to survive in the near term.

Where Analysts Stand on Lucid

Most analysts on Wall Street are positive about LCID stock. For example, a survey by Seeking Alpha of five analysts that cover the stock has an average price target is $42 per share. That is 8.5% over today’s price of $38.72 per share. However, two of these analysts have a strong buy and one has an upper target of $60 per share.

Moreover, the TipRanks survey of six analysts shows an average price target of $41.20, or 6.4% over today’s price. Moreover, Yahoo Finance, which uses the Refinitiv analyst data, has a survey of four analysts covering Lucid. The average price target is $42.75, or 10.4% over today’s price.

What To Do With LCID Stock

Lucid now has a market value of $64.55 billion at $38.72 per share for LCID stock, according to Seeking Alpha. This puts it on a forward price-to-sales (P/S) metric of 11.7 times 2023 sales.

However, given its forecast sales of about $14 billion in sales for 2025, its forward P/S sales metric is 4.61 times sales. On an adjusted basis, the 2025 revenue works out to $8 billion (using a 15% discount rate for four years). That puts it on an adjusted P/S metric of just 8.1 times revenue.

That is not that expensive, especially if you compare it to Tesla which trades at a much higher P/S metric.

Therefore, investors should consider taking a stake in LCID stock now, if they don’t already have a position. Moreover, for those that do have shares, they should probably average down and lower their cost. This is because LCID stock is cheap and will likely produce a good return over the long run.

On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.

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