NIO's Lower Share Price Charges Interest In Chinese EV Maker

The share price of Chinese electric vehicle maker NIO Inc. ADR NIO has dropped to a level the sell-side likes given expectations for improving sales, leading two analysts to upgrade the stock.

The Analysts

Bank of America Merrill Lynch analyst Ming-Hsun Lee upgraded Nio from Underperform to Neutral and lowered the price target from $6.80 to $6.20.

Citigroup’s Jeff Chung upgraded Nio from Neutral to Buy and lowered the price target from $7.20 to $6.80.

The Thesis

Concerns about orders missing guidance and a cut to electric car subsidies by the Chinese government seem to have been priced into the market — and driven Nio’s share price down 47 percent from its early March peak, Lee said in the Thursday upgrade note.

After Nio competitor Tesla Motors Inc. TSLA cut prices. there were concerns that it would negatively affect the Chinese EV maker, but that too is likely now accounted for, the analyst said. 

Shipments in the second quarter “may not be robust,” Lee said, but should top the first.

Among the positives he named: Nio has a new, six-seat ES8 that is expected to be popular and is closer to delivery on its lower-priced, five-seat ES6. NIO has also lowered its pre-order deposit, which should help demand, the analyst said. 

With BofA now expecting sales volume to grow, Lee said the stock’s current value looks fair.

Citi’s Chung also cited the lower valuation in moving to recommend the stock after previously being on the sidelines.

Price Action

Nio shares were trading up 1.13 percent at $5.38 at the time of publication Thursday. 

Related Links:

NIO Reveals New Electric Vehicle: 'A Competitive Product In A Premium Segment'

Nio On Roller Coaster Since IPO 

Photo courtesy of Nio.