Nio Analyst Says Improving Sales Trajectory, Easing Liquidity Concerns Support Bullish Stance

Chinese electric vehicle startup Nio Inc – ADR NIO reported strong deliveries for April, prompting an analyst at BofA Securities to turn bullish on the company.

The Nio Analyst

Ming Hsun Lee upgraded Nio ADRs from Neutral to Buy and increased the price target from $3.40 to $5. 

The Nio Thesis

Nio's 181% year-over-year increase in April deliveries underlines the surging demand for premium EVs, Hsun Lee said in a Wednesday upgrade note. (See his track record here.)

The analyst attributed Nio's strong showing to product quality enhancement from the launch of the new ES8 with longer cruise range; and the fast-expanding NIO Space likely boosting sales and improving brand image following a battery recall event in the third quarter of 2019.

The Hefei government's investment in Nio China has also likely increased consumer confidence, he said. 

Nio is likely to get incremental support from the government by way of subsidies, tax credits and low-interest loans after the deal, significantly improving its cash flow, Hsun Lee said. 

The new EV subsidy scheme favors Nio, as it is the major EV maker with battery-swap technology in China, the analyst said. The subsidy leaves out new energy vehicles, or NEVs,, with manufacturer suggested retail prices of over 300,000 yuan ($42,225), except for those NEVs with battery-swap technology, he said. 

BofA raised its 2020 and 2021 volume sales estimate by 7% and 6%, respectively, and lowered its 2020 and 2021 loss estimates.

NIO Price Action

Nio ADRs were advancing 6.71% to $3.50 at the time of publication Wednesday.

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Photo courtesy of Nio.