Is Cathie Wood’s ARK Invest Fund About To Incorporate NIO (NYSE: NIO) in Its ETFs?
NIO (NYSE:NIO), one of the largest EV manufacturers in China, appears to be on the radar of Cathie Wood and her ARK Invest fund. In the light of a confluence of factors, we believe that NIO is likely to become a part of the ARK Invest ETFs soon.
Cathie Wood had expressed positive sentiments about NIO in a March interview with Business Insider:
"I have been very impressed by China's focus on electric vehicles both from an environmental point of view and a technology point of view."
She had then gone on to note that her team was looking at NIO and other Chinese EV companies, including Xpeng (NYSE:XPEV) and AutoX. Of course, this statement on its own does not constitute the entirety of our thesis. Given the emerging market dynamics, we believe that ARK Invest may be compelled to incorporate NIO and other Chinese EV stocks. Let’s delve deeper.
Deutsche Bank penned a note recently, warning of a modest equity market correction ahead. After this correction though, the German bank believes that equities will rally strongly, led by growth stocks. Of course, with a P/S ratio of 18.51, NIO is an emblematic growth story. For reference, Tesla’s (NASDAQ:TSLA) current P/S ratio is 25.43. Consequently, when coupled with a number of upcoming bullish developments, we believe that the NIO stock can generate outsized gains in 2021 and beyond, thereby necessitating its inclusion in the ARK ETFs.
So, what are these bullish factors that necessitate NIO’s inclusion in ARK ETFs? First, as we noted in a recent post, NIO secured a lucrative partnership with Sinopec – China’s largest network of gasoline stations – for the deployment of its second-generation Battery Swap stations. The move would allow NIO to dramatically scale up its Battery Swap 2.0 station deployment across China with Sinopec’s assistance. As an illustration, the company now hopes to deploy at least 5,000 such stations across China by 2025. Through this move, NIO would be able to lock in a substantial number of existing and future customers to its ecosystem, thereby creating a monopoly of sorts in the largest market for electric vehicles. NIO is also tapping additional monetization avenues by opening its EV charging network to other OEMs in China, as was the recent case with Ford’s (NYSE:F) Mustang Mach-E. Additionally, NIO is set to officially unveil its plans to enter the EU in early May, paving the way for the company to become a global story and not just a Chinese one. Finally, the company is ramping up the annual capacity of its existing plant – built in collaboration with JAC – to 300K units by the end of 2021.
In the light of this encouraging bullish outlook, we believe that it is only a matter of time when NIO shares become a part of the ARK ETFs, thereby unlocking a substantial source of marginal inflows.
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