Over the past year there has been one company that has risen from the shadows and is now in the spotlight, and that is neo through a series of moves and external factors. Neo has successfully been able to come out of bankruptcy and disrupt the car market. In many ways, during this time, the stock price has reflected this disruption, as the stock went from under two dollars. A share to at the time of recording this video, almost 50 dollars a share, but how much of the stock price is warranted and is there still an opportunity to invest in this video? I'm gon na go over how neo went from bankruptcy to disruption.

Welcome to cas gaines academy, if you're new to the channel, please consider subscribing for more content like this and let's get right into it before we get into the opportunity of neo. We must start from the beginning to truly understand where the company is coming from. On september 13th, 2014, the formula e season was born into existence. The competition consisted of a race between electric race cars over a series of competitions.

Each season would have 11 races that would ultimately culminate in the final formula e championship. Countries all over the world would nominate their most qualified racers in fastest electric race, cars, major companies that can vision, energy, renault audi and venturi stepped up to represent their country. Yet one company stood out from the crowd, which was china's team named china's racing. That was later renamed to next ev, while next evie only ended up placing fourth in the championship round the vehicle they showcased had impressive potential board.

Member and founder, william lee had an idea to leverage next evs technology and create an electric vehicle company, starting from top to bottom. This brand was, as some of you may have guessed neo immediately. Several top brands invested into the company, including 10 cent baidu and lenovo neo's first vehicle. The neo ep9 could go zero to 124 miles per hour in 7.1 seconds, leading it to beat the lap record on a nurburgring track in 2016..

The vehicle could also have its battery pack swapped in a short period of time, which will become relevant very soon after starting neo, william ran into some major issues. While he and his team could make an enticing prototype, it was practically impossible for them to manufacture the vehicle, as they had no expertise in building the machines that create the parts. In other words, neo did not know how to make the machines that make machines. On april 4, 2016 williams signed a contract with jac motors to have jac, which is experienced with manufacturing and supplying to produce neo vehicles to make this clear, neo was not manufacturing their own cars.

The development with neo and jac is extremely important to pay attention to. As it creates huge impact on not just neo's production output, but also the automaker's profits around a year later, in 2017, new had planned to create its own factory in shanghai, so that the automaker did not have to rely on jac motors to manufacture the automaker's vehicles. However, after taking a deeper look, neo's team decided to shut down those plans in 2018, neil unveiled, the neo es8, a five-door suv3 with a 70 kilowatt-hour battery pack that gave it an nedc driving range of 220 miles at the cheapest model. This vehicle costs 67 000.

Us dollars to be honest, this deal doesn't look so great, as even with the any dc overestimate. The vehicle still has a very short driving range for the price. Keep in mind that today the es8 has a range of 360 miles on the any dc range test. But when it was first revealed in 2018, it had a range of just 220 miles in the following year: neo unveiled the neo es6, which can go from zero to 62 miles per hour in 5.6 seconds and has an nadc range of 317 miles at the cheapest Price, the neo es6 costs 54 000 us dollars not the best, considering that the nedc overestimates the range but definitely getting somewhere to the public.

These vehicles were extremely underwhelming on their release, dates and gave neil major financial troubles after being on the verge of bankruptcy. Neo announced a one billion dollar backing from the chinese government. This investment definitely marks a turning point for neo. During this time, neal was worth under three dollars a share, and the current valuation of 48 dollars per share shows how china's one billion dollar investment saved.

The company, while propelling it further, this is especially evident when, in july of 2020, the neo ec6 was officially launched. This vehicle starts at 54 000 and has an nadc range of 382 miles, along with zero to 62 miles per hour in 4.7 seconds. The reason why this vehicle is such a major upgrade is because of catl's nico 55 ternary cell with this new battery cell neo's vehicle will actually have bi-directional charging, which is better known as vehicle to grid, essentially you'll, be able to transfer energy from your car to The utility grid, or even your own home, what's even more interesting, is what neo unveiled following the neo e6 reveal, which is, as many of you know, battery as a service. Essentially, how battery as a service works is that you'll be able to purchase a new vehicle and lease out the battery.

This lowers the cost to purchase a vehicle by an estimated 25 percent, which can be a win-win for certain customers. In order to lease neal's battery. You have to pay 150 us dollars per month, which is quite expensive for some another service that neo offers is the ability to have your vehicle's battery swapped in a matter of three minutes. How this works is that every time you need a charger vehicle, you go through this process.

First, your vehicle be driven inside the swap station by the swap station manager under the vehicle. There will be a machine that has a battery that will be swapped with the one inside your vehicle. This entire process will be done by neos ai once your battery is swapped, neo will recharge the battery so that it can be used for the next swap as long as you own, a neo vehicle. This entire process is free.

Neo's battery swap service is definitely quite revolutionary, as they've catered to the needs of china's population, yet, along with the pros of neo. There are some concerns that pop up when we look at it from an investment perspective when answering the question of whether neo is still worth investing in. You must address the few questions. The first one being does neil's business model, have the potential to be profitable in the future.

Unlike tesla neo is not vertically integrated, as we discussed earlier. Jac motors is manufacturing, neo's vehicles and neo does not have any proprietary battery technology. This is important because, as neo has disclosed before, they do pay a fee for every vehicle that comes out of jac's factory. In addition to every catl battery that is used from the end of 2019 to a new was first founded, niels paid approximately 91.9 us dollars to jac motors during this time, neo sold 31 913 vehicles.

If we take the total amount that neo paid and divided by the vehicles sold, we get two thousand eight hundred seventy nine dollars. This means that neo pays jse motors two thousand seven hundred eighty nine dollars per vehicle, which is not too bad, although we do have to take into consideration that neo does have to sell vehicles at a premium compared to other automakers catl's battery fees are quite low, As it is especially evident from the fact that even tesla is using catl's batteries, given neo's gross margin of 12 in the last quarter, it is evident that neo does have the potential to make decent profits. However, as vertically integrated ev companies such as x-paying and tesla, ramp-up production and lower costs against neo neal's reliance on jac could become a barrier to making profits over the long term. I do expect neo to create its own factory, as the automaker did plan to do so in the past.

Yet it would be extremely difficult to compete directly with tesla, given their vertical integration in giga, shanghai and branding. The eevee market is large enough for others to thrive, but this leads us to the next question is neo's current valuation, overblown as i'm recording this video neo is priced at 48, a share which gives it a market capitalization of 60 billion dollars, unlike tesla neil, doesn't Have any plans to expand out of the car market in the new future, as the automaker doesn't have much proprietary technology to expand elsewhere? The total passenger car market size in china is at 455 billion dollars, so assuming all cars will become electric, as the vast majority likely will then giving neo a potential market share of seven percent would be equivalent to thirty one point: eight billion dollars out of four Prices sales, multiple - this would value neo at 127 billion dollars, which is not much higher than the current valuation of 60 billion. Keep in mind that the car company, with the highest market share in china is volkswagen, which is at 14 and following volkswagen, honda at seven percent. In my opinion, the opportunity cost isn't too appealing at this valuation.

However, this again leads us to new support from the chinese government, as we discussed earlier, neo does have support from the chinese government giving the government's 1 billion investment into neo when is on the verge of bankruptcy, even still with other eevee companies entering the market like X, ping and lee otto it'll be difficult for neil to continue being the leader in terms of government support. Nonetheless, new support from the chinese government definitely reduces the downside risk on leo. The last concern that it unfortunately must bring up is regulatory risks. Neo does not follow sarbanes-oxley regulations, which puts it at risk in the u.s pwc zhang tian, the auditor for neo has let fraudulent companies pass its audits in the past.

To be clear, i don't think neil is a fraud at all. William lee seems very ambitious with his vision and i don't doubt it, but i'm putting the information out there for those of you who could have doubts now. Finally, we get to the question which is: is neo still a buy at these levels? Personally, i'm not invested in neo and i'm holding back on buying neo until there's a pullback until neo is able to vertically integrate or enter other markets. I won't be buying the stock at these valuations.

I'm certainly not a financial advisor, and this shouldn't be taken as financial advice. If you're looking to buy in, i would suggest looking at other opportunities as well as, although neo is a fantastic company, i'd much rather buy tesla for the potential in solar energy international disruption. In the vehicle market and entrance into other modes of transport, let me know what you think about neo in the comment section below i'm very open to seeing your opinion. If you enjoyed this video, please hit the like button and subscribe.

If you haven't already and i'll see you in the next one.