Is Niu Stock A Buy?

Is Niu stock a Buy? Niu Technologies – ADR (NASDAQ:NIU) is a Changzhou, China-based electric scooter company that expanded to Europe during the pandemic. It sold nearly 150,000 e-scooters in the fourth quarter of 2020 alone, giving its stock price a big boost.

Demand for e-scooters in both China and abroad rose during the pandemic. Social distancing guidelines inspire many people to find personal mobility solutions, rather than relying on crowded public transportation.

And EVs of any kind gained heavy investments in the early 2020s so far. Investors are sold on the idea of a sustainable electric future driven by Tesla’s (NASDAQ:TSLA) induction into the S&P 500. The company is both expanding international distribution and creating new models at different price points.

Let’s plug into Niu Technologies to see if it will power investor returns or leave portfolios running on empty.

Niu Has A Regulatory Maze To Navigate

Niu Technologies is a Chinese e-scooter company founded in 2014. It received $125 million in venture capital by introducing a lithium-ion battery to the Chinese e-scooter market that traditionally used lead-acid batteries.

These scooters are road-capable and can reach speeds of up to 45 mph and ranges up to 87 miles before needing a charge. This is a disruption to the Chinese e-bike industry, which was estimated to include over 200 million products in 2019. That’s one for every car in the country.

By 2019, the company earned $300 million in annual revenue. While most of its sales are in China, it’s aggressively focused on growing its European presence.

However, Europe and the U.S. have complicated driving laws to navigate. That’s because each city, state, and country have their own traffic laws, and electric scooters may or may not be legal everywhere. The company has a wide range of scooters with different ranges, and they could be legal or illegal.

The push to more electric vehicles and proposed battery technology upgrades by the late 2020s have some investors thinking about potential. As the company expands speeds and range, it continues gaining exposure in other nearby markets.

Is Niu Stock A Buy?

Niu Technologies had a P/E ratio over 130x. The company’s share prices surged from a 52-week low of $6.08 during the pandemic to a high of $53.38, before settling in the $40.00 range.

The company’s fourth quarter sales were up 40.9 percent year over year, and 91 percent of those sales were in China. This is a 35 percent increase for the region and shows growth on all ends for Niu’s sales when combined with the nearly 180-percent increase in international markets.

Niu continued expanding its product line to cover everything from entry level to high-end customers. Each model increases growth potential, especially when entering even more international markets.

Although everything sounds rosy, there are some inherent risks of investing in any stock. Niu is no exception.

Is Niu Stock Overvalued?

A risk to snapping up Niu shares is that the company’s traded recently at the highest market valuation in its entire history. Of course, that history also isn’t very long – it’s still not a decade old. And the company needs to spend heavily to ensure it continues expanding both domestically and abroad.

It’s not just marketing spend to reach consumers (although that’s also important). Electric scooters face hurdles getting legalized for usage on roads, where they’re meant to be used.

China’s trade war with the U.S. puts the brakes on any hope of expansion into the U.S. market. And the European market has a lot of red tape too.

Major cities in Asia are ideal for these vehicles, and much of their appeal is for delivery drivers and other gig economy workers responding to the pandemic economy. There’s a chance their appeal will wear off when the global economy recovers.

And as it expands, Niu will face growing competition from legacy scooter manufacturers.

Can Niu Competitors Win?

Vespa is the most iconic scooter brand name in the western world. It’s essentially the Harley Davidson (NYSE:HOG) of scooters and has a firm grip on the European and American (both north and south) markets.

And Vespa has an electric scooter of its own, the Elettrica. It’s available in both a 28 mph and 45 mph model that it can offer to its established customer base.

It’s not the only scooter brand either – Honda, Suzuki, Hero, and Yamaha are among the companies with scooter options. Many also make motorcycles, ATVs, and other alternative vehicles, and pushing these to electric vehicle (EV) versions is one step of the market’s disruption.

They are absolutely doing that too – even Harley Davidson has the all-electric LiveWire in 2021. That puts serious pressure on Niu’s expansion efforts and growth potential, even in mainland China.

Is Niu Stock A Buy? The Bottom Line

Niu Technologies is a Chinese electric scooter brand that experienced great growth during the pandemic. China’s scooter market uses largely lead acid, and it disrupted the industry with a lithium-ion alternative. It’s something also being implemented in European and American brands.

As the company expands into Europe, it’s experiencing growth. But it also needs to penetrate the Americas, India, Africa, and other important markets. This expansion is costly for both marketing and government red tape.

The company is still showing strong growth, and if it can continue innovating with new models to fit different price points, it can outperform more established vehicle makers. EVs are a hot commodity in the 2020s, and this could be a great way to jump on the Chinese market for those who missed out on much of Niu’s growth.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.