Could buying NIO stock be like investing in Tesla a decade ago?

Tesla inventory strikes round loads. Over the long run, although, it has been a phenomenon. Previously decade, it’s up by 3,097%. I’ve no plans to put money into Tesla, however ought I to think about selecting up some inventory in one other EV maker, NIO (NYSE: NIO), whereas it sells for a number of {dollars} apiece?

Sure, the corporate is smaller than Tesla and loss-making. However a decade in the past, Tesla was loss-making too — and far smaller than it’s now.

Possibly NIO might find yourself attaining one thing related?

A particular area of interest

As a enterprise, I see loads to love about NIO.

It has been rising gross sales and is now a sizeable enterprise. Final 12 months’s car deliveries of 326k represented year-on-year quantity development of 47%.

In contrast, Tesla delivered 1.6m autos final 12 months. That really represented a 9% fall in comparison with the prior 12 months.

Which means that, final 12 months, NIO’s gross sales volumes have been about 20% of Tesla’s (and shutting the hole quick), however NIO’s $11bn market capitalisation is lower than 1% of Tesla’s $1.4trn market cap.

Certain, NIO doesn’t have the ability technology and storage enterprise Tesla does, although its personal experience in battery swapping might assist it go down that path if it selected to.

It additionally has been much less vocal about its plans for self-driving taxis and robotics than Tesla, although over time I reckon each firms might pursue that enterprise.

I believe NIO has executed a greater job than Tesla in some markets of growing a moneyed clientele on the lookout for pretty dear vehicles.

Given downward strain on electrical car revenue margins in recent times, that would give it some cushion in comparison with rivals.

Does the valuation make sense?

However evaluating NIO to Tesla is probably not useful, as personally I believe Tesla’s valuation is simply too excessive to justify.

One massive distinction is, as talked about, NIO stays loss-making and continues to burn by money.

That isn’t some small distinction, I believe it impacts the basic funding case for the inventory.

If I purchased now, I’d be banking on the automotive maker turning a revenue in some unspecified time in the future. However there isn’t any assure that can occur.

Strongly rising gross sales volumes haven’t but fed by to the type of economies of scale and resultant narrowing of losses that I’d hope to see as a possible investor.

I reckon NIO continues to have large potential and that may not be absolutely mirrored within the present inventory value. Shopping for it as we speak might probably find yourself being like shopping for into Tesla a decade in the past.

For now, although, I’m biding my time. NIO has not but proved it has a worthwhile enterprise mannequin. Which will come over time – and the inventory might soar on the again of it.

However I want to see arduous proof of profitability earlier than contemplating placing a penny into the inventory.