Citron Research: Nio Is 'Tesla Deja Vu'

Nio Inc - ADR NIO shares were surging Monday after Citron Research’s Andrew Left said the stock is a ticking time bomb, comparing it to Tesla, Inc. TSLA.

Nio’s massive outstanding short position and its strong management team make it the worst possible way for U.S. investors to bet against a weakening Chinese economy, the short seller said in a Monday note. 

“After years of battling the ‘Tesla Story,’ Citron learned to recognize the opportunities created by total industry disruption and to disregard today's numbers when considering the value of the disruptor." 

Nio has a cult-like following similar to Tesla and has a committed base of long-term investors, Left said. 

Brand Value

Like Tesla, Nio’s brand value goes far beyond selling cars, according to Citron. 

“NIO is not just a car company, it is a lifestyle and a brand that is ready to disrupt and the implications for the stock price cannot be ignored,” Left said. 

Left said Nio also has the advantage of having watched Tesla’s struggles and has the opportunity to learn from its mistakes.

Nio recently guided for about 7,000 vehicle deliveries in Q4, up 100 percent from a year ago.

Within a month of when Tesla first delivered 6,900 quarterly vehicles back in January 2014, the stock gained 50 percent, Left said. 

Massive Short Stake

While Nio is working to change the world, short-sellers are piling into the stock at an incredible rate.

Bank of America Merrill Lynch recently estimated the short percent of the stock’s “active float," or shares not held by passive investors, could exceed 100 percent.

Left said Nio would certainly benefit from the eventual end of the Sino-American trade war — but long-term investors should eventually come out on top regardless.

“From what we have seen before (and learned some painful lessons in the process), investors in disruptive companies such as NIO with a lot a blue sky ahead of them have a lot more patience than do the short sellers," he said. 

Nio should have “little resistance” on the path to $12, which represents about 66 percent upside from Friday’s closing price, according to Citron. 

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Photo courtesy of Nio. 

Posted In: Andrew LeftCitron Researchelectric vehiclesAnalyst ColorShort SellersPrice TargetAnalyst Ratings