Nio vs. Fisker: Which Electric Vehicle Stock is a Better Buy?

The electric vehicle (EV) industry has been deemed as one of the fastest-growing segments in 2020, estimated to be worth $567 billion within the next five years. China, which is already the biggest EV market in the world, is set to account for 70% of total EV sales by 2025.

NIO Ltd. (NIO) is one of the biggest EV manufacturers in China and is currently expanding its market to Europe. Fisker, Inc. (FSR) on the other hand, is a relatively new company, making its market debut in October 2020. FSR is currently gearing up its production process to launch its first EV Fisker Oceans SUV in may of 2021 in the Los Angeles Auto Show and begin commercial sales by 2022.

While both companies have garnered significant investor attention, which stock is a better buy now? Let’s find out.

Latest Developments                                                       

FSR went public through a SPAC with Spartan Acquisition Energy Corporation on October 29th, making it one of the newest players in the electric vehicle market. The company has generated $1 billion in cash through the merger, valuing it at $4.84 billion. The stock has gained 94.6% since its debut.

FSR is expected to launch a Fisker Ocean vehicle in 2022, and three vehicles by 2025. FSR recently partnered with Volkswagen to sell its SUV vehicles due to 2022 on the Volkswagen MEB platform. The company also has a standing agreement with Magna for the supply of Dream EVs in Europe.

On October 21st, FSR announced a strategic partnership with Viggo Sign for the delivery of 300 vehicles in the fourth quarter of 2020.              

Comparatively, NIO already has a dominating market share in China’s electric car market. It is currently planning to enter the European car market.

NIO recently raised $1.30 billion through an American depository share offering, which is expected to contribute to the research and development of electric car ecosystems and automated technologies as well as developing its global market presence. It also plans to buy back some of its shares from the Hefei investor group, which previously bailed out the company with a $1.40 billion cash infusion.

NIO is the first company to launch a ‘battery as a service’ (BaaS) subscription model, allowing customers to purchase electric vehicles and battery packs separately. It is planning to launch its EVs in the European market by 2021. NIO aims to penetrate the most important global markets across the world by 2023 - 2024, according to CEO William Li.

Recent Financial Results

NIO’s vehicle sales and total revenues both increased 146.5% year-over-year to $493.40 million and $526.40 million, respectively, in the second quarter ended June 2020. Gross profit of $44.30 million indicates a significant improvement from the loss reported in the prior-year quarter.

NIO delivered 5,055 vehicles in October, up 100.1% from the year-ago value. As of October 31st, the company delivered 31,430 vehicles this year, indicating a 111.4% increase year-over-year.

FSR made its public debut last month and is expected to commercially launch its EVs in 2022.

Expected Financial Performance

FSR’s EPS is expected to grow at a rate of 10% per annum over the next five years. Analysts expect revenue to rise by 22.2% next year.

NIO’s revenue is expected to rise 103.6% in the current quarter, and 79.3% next year. The consensus EPS estimates indicate a 51.3% rise in the current year, and 32.9% next year.

POWR Ratings

NIO is rated “Buy” in our proprietary POWR Rating system, while FSR is rated “Neutral”. Here’s how the four components of our POWR Rating are graded for both these stocks:

NIO has an “A” for Trade Grade and Peer Grade, “B” for Industry Rank and “C” for Buy & Hold Grade. It is currently ranked #3 out of 115 stocks in the China group.

FSR has an “A” for Industry Rank, “C” for Trade Grade and Buy & Hold Grade, and “D” for Peer Grade. It is currently ranked #27 out of 33 stocks in the Auto & Vehicle Manufacturers industry.

The Winner

FSR, founded by Henry Fisker in 2016, has a long history. Before this, Henry Fisker found Fisker Automotive, which went bankrupt in 2012. FSR currently has no prototype models in the market. While the founder and CEO have significant exposure and experience in the market, the performance of its EVs in comparison with the current industry leaders is yet to be determined.

NIO, on the other hand, has emerged as one of the leading EV makers of China, with expansion plans to penetrate the global market. Hence, NIO is a better buy here.

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NIO shares were trading at $44.37 per share on Monday morning, down $0.19 (-0.43%). Year-to-date, NIO has gained 1,003.73%, versus a 13.61% rise in the benchmark S&P 500 index during the same period.

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

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