Earlier this month, Deutsche Bank’s Edison Yu issued a Catalyst Call on Nio (NIO) stock, recommending it as a short-term play, based on the premise the stock was ripe for a turnaround after falling ~30% from February’s peak.
The idea did not work out as planned initially. While Yu concedes his call might have been too early as he underestimated a number of “tactical factors,” the analyst sees several reasons why investor sentiment “should be close to bottoming.” Well, it appears the market has been taking notes, as shares climbed 7% higher in Monday’s session.
So, what should help Nio sustain the upward curve?
First off, the Chinese EV player has concluded its at-the-market offering – since November 9, around $800 million worth of stock has been issued.
Secondly, retailers have been showing a preference for US-based EV companies with shares of Lucid, Rivian and GGPI/Polestar all climbing higher. “While it is unclear how long this could continue,” Yu said, “We think this could change going into NIO Day on 12/18 where the company can create much more excitement around its future products and technology.”
Additionally, soft quarterly results from Chinese e-commerce companies put pressure on other Chinese tech stocks and the downbeat sentiment has spilled over to the EV segment. This appears to be due to a misconception by US investors; while Chinese tech stocks have been feeling the pressure of regulatory crackdowns, the Chinese government has been “super supportive” of the EV industry with penetration growing and sales volumes trending higher.
Lastly, at the start of next month, Nio will announce November deliveries and Yu is anticipating a “large month-over-month improvement to around 10,000 units vs. October’s 3,000 units.”
Whether the short-term idea works out or not, with the long-term in mind, Yu sticks with a Buy rating and $70 price target, suggesting shares will surge ~71% over the next 12 months. (To watch Yu’s track record, click here)
Looking at the consensus breakdown, almost all of Yu’s colleagues agree; barring one Hold, all 7 other recent reviews are positive, culminating in a Strong Buy consensus rating. The average price target is a more modest $57.13, yet the figure still implies one-year upside of 35%. (See Nio stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.