NIO stock has bottomed, analyst says

NIO Inc. stock was expected to rebound slightly on Friday after JP Morgan indicated that the China-based electric vehicle maker’s lower margin and supply outlook put a bottom on results.

In a note titled “Bottoming,” JP Morgan analyst Nick Lai reiterated the Overweight rating he’s held on the stock since October 2020. The price target was held at $30, up about 59% from Thursday’s close of $18.82.

US-listed stock NIO,
Gained 0.2% in premarket trading on Friday after falling 7.7% in the previous session on NIO’s disappointing outlook. Before the post-earnings sell-off, the stock was up 60% since closing at a two-year low of $12.71 on May 11.

Lai acknowledged that NIO’s first-quarter results were “messed up,” but said the company’s call for a drop in shipments in the second quarter was “no surprise” given the COVID-19-related lockdowns in Shanghai. Lai said investors should focus on the company’s prospects for the second half of the year, should supply chain restrictions ease after lockdowns are lifted.

“What’s more important from here, in our view, is the production path as well as the margin recovery in 2H22 after the bottom in 2Q22,” Lai wrote in a note to clients.

Lai believes NIO will rapidly ramp up production along with new models and easing of supply constraints in the second half of the year, with “significant sequential volume growth” in the third and fourth quarters.

Mizuho analyst Vijay Rakesh also remained bullish after NIO’s results, saying the “soft” outlook for the current quarter was expected and there were “multiple drivers” for a recovery in the second half of the year. Rakesh lowered the price target to $55 from $60, but that new target still implied a nearly tripling of Thursday’s close.

“Despite near-term headwinds, we believe NIO remains well positioned to benefit from the multi-year EV ramp, premium EV leadership in China, the largest EV market, with future growth as EU/Global expansion and Mass market entry ahead,” Rakesh wrote.

Overall, no fewer than nine of the 33 analysts polled by FactSet lowered their price targets in the wake of NIO’s results and outlook. However, Wall Street remained mostly bullish, with 32 analysts having the equivalent of buy ratings and the other having the equivalent of neutral. And the average price target of $35.30 implies an 88% upside move.

NIO shares are down 40.6% year-to-date, while exchange-traded fund iShares China Large-Cap FXI,
is down 10.6% and the S&P 500 Index SPX,
has lost 15.7%. NIO stock has bottomed, analyst says

Brian Lowry

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