Wall Street Bullish On Nio Despite Recent Pullback: 'A Must-Own Growth Stock'

Despite near-term weakness in Nio Inc – ADR NIO shares following Citron Research's bearish call on the stock, Wall Street is showing confidence in the Chinese electric vehicle manufacturer. 

The Nio Analysts: Deutsche Bank Securities analyst Edison Yu reiterated a Buy rating on Nio and increased the price target from $34 to $50.

BofA Securities analyst Ming Hsun Lee reiterated a Buy rating and hiked the price target from $23 to $54.70.

JPMorgan analyst Nick Lai maintained an Overweight rating and lifted the price target from $46 to $50.

Credit Suisse maintained an Outperform rating and raised the price target from $25 to $60.

Deutsche Bank Sees A Major Winner In Chinese EV Market: Nio's third-quarter results could be termed mixed, as it reported in-line revenues but a lower-than-expected gross margin due to the timing of regulatory credits, Deutsche Bank's Yu said in a note.

The fourth-quarter delivery and sales outlook was materially ahead of the consensus estimates, the analyst said. 

Supply constraints have become less of an issue, with the company ramping capacity to achieve production of 7,500 units by January, he said.

Despite the volatility and potential corrections depending on EV sentiment and fund flows, Nio is on track to take share from traditional internal combustion manufacturers thanks to its aspirational brand status and innovative and nimble business model, Yu said.

This will help the company emerge a major winner in the Chinese auto market by the middle of the decade, the analyst said. 

"This sets up NIO to be a must-own stock for growth-oriented and ESG investors, in our view." 

In the near-term, Deutsche Bank said it continues to expect robust monthly delivery volume until the Chinese New Year, driven by the newly launched EC6 SUV coupe, 100-kWh battery pack option and growing battery-as-a-service adoption.

The firm raised its fourth-quarter and 2021 forecasts across the board, reflecting higher sales volume and associated operating leverage, and also to account for higher contributions from regulatory credits.

Related Link: 7 Takeaways From Nio's Q3 Earnings Call

Nio To Turn Profitable By 2023, BofA Says: Nio will turn profitable in 2023, a year earlier than BofA had previously estimated, Hsun Lee said in a note. 

The analyst raised his 2021 through 2023 sales volume forecast above consensus estimates, attributing the elevated expectations to a more positive view on Nio's strategies; a potential overseas contribution starting in 2022; and cooperation with Mobileye on robotaxis in China.

BofA also narrowed its net loss forecast for 2020 through 2021.

"As such, we believe NIO's share in China EV market will rise from 2% in 2019 to 9% in 2022," the analyst said. 

JPMorgan On Nio's Competition: Nio's fast-growing ecosystem — with a charging network, online customer community, value-added service and sticky customers — will ultimately benefit Nio's business opportunities, JPMorgan analyst Lai said.

The analyst noted that about 40% new buyers are referrals from existing users. 

Nio's sales volume and how it tackles competition in premium segments will be crucial, he said. 

Based on the model pipeline from premium OEMs, the analyst said Nio could face competition from Tesla Inc's TSLA Model Y, the price of which will likely to drop from 480,000 yuan ($72,888) to 350,000-400,000 yuan ($53,147-$60,740) and 

German brands that may not have volume models anytime soon, he said. 

"Meanwhile, the EV addressable market is growing rapidly, hence we expect to see a 'rising tides lift all boats' rather than 'winners take all' phenomena." 

Credit Suisse Dissects Nio's Margin Trajectory: The key surprise in the third-quarter print is the higher-than-expected ES8 high-margin SUV contribution, according to Credit Suisse, which added that the vehicle's volume share rose seven points to 29%. 

Some of the margin improvement came from falling component sourcing costs, including batteries, the sell-side firm said. 

The company guided to further vehicle margin expansion in the fourth quarter thanks to the removal of the previous battery financing interest rate subsidy and a falling per-unit fixed cost from operating leverage, according to the Credit Suisse note. 

The company also expects 120 million yuan ($18 million) income from sales of its 2019 NEV credit, which is to be booked in the fourth quarter, the sell-side firm said. 

Nio's key catalyst is the new sedan to be showcased on Nio Day Jan. 9, according to Credit Suisse. 

NIO Price Action: At last check, Nio shares were rising 1% to $45.51.

Related Link: Nio's 4th Annual 'Nio Day' Coming In January: What Investors Need To Know

Photo courtesy of Nio. 

Posted In: BofA SecuritiesCitron ResearchCredit SuisseDeutsche Bank SecuritiesEdison YuJeff ChungJP MorganMing Hsun LeeNick LaiAnalyst ColorEarningsNewsShort SellersPrice TargetReiterationGlobalAnalyst RatingsTech