Nio's Outsized June Gains Push Goldman Sachs To The Sideline

Nio Inc's – ADR NIO June rally has prompted an analyst at Goldman Sachs to move to a cautious stance.

The Nio Analyst: Fei Fang downgraded Nio from Buy to Neutral and hiked the price target from $6.40 to $7. 

The Nio Thesis Nio shares have advanced over 50% since Goldman's June 3 upgrade versus a mere 3% gain by the MSCI China Index, Feng said in a Wednesday downgrade note. (See the analyst's track record here.)

Since the upgrade, Nio has completed an 82.8-million-ADS offering, including the green shoe option, at $5.95 per ADS, raising net proceeds of $475 million, the analyst said.

This was about 77% higher than Goldman's estimated inflow, which the sell-side firm said removes the liquidity risks between now and the electric vehicle manufacturer's expected break-even point in 2022. 

Luxury car penetration in China is accelerating at a faster-than-expected rate in 2020, Fang said. Goldman has increased its 2020-2030 luxury market forecasts by 2%-10%, the analyst said. 

Goldman maintained its Nio revenue and profit estimates for 2020 through 2022 and adjusted cash flow, balance sheet and share count estimates to reflect the ADS offering.

Goldman raised its volume forecast for Nio by 2%-10% in 2023-30, with unchanged market share assumptions.

Consequently, the firm increased its 2023-2030 net profit estimate by 3%-16%, reflecting higher volume and revenue forecasts and operating leverage.

NIO Price Action: Nio shares were down 3.94% at $6.95 at the time of publication Wednesday.

Related Links:

Nio Hits BofA's Recently Revised Price Target In June Rally

Tesla Vs. Nio Vs. Xpeng: A Look At The Chinese Electric Vehicle Market

Photo courtesy of Nio.