Nio Inc - ADR (NYSE:NIO) shares traded higher by 4% on Monday after one Wall Street analyst upgraded the stock.
The Analyst: Bank of America analyst Ming Hsun Lee upgraded Nio from Neutral to Buy and raised his price target from $25 to $26.
The Thesis: With Nio shares down roughly 60% in the past year, Lee said all the negatives the company has been battling are likely fully priced in at this point. At the same time, he sees four upcoming catalysts for Nio that could trigger a rebound in the stock:
- Nio is beginning what will likely be a strong model cycle and already has a large order backlog.
- Nio has raised prices on its ES6, ES8, EC6 and ET7 models, passing higher costs on to customers and easing margin pressures.
- Nio's supply chain will likely improve in coming weeks and return to normal in June.
- Nio was listed on the Hong Kong exchange in March and expects to be listed in Singapore on May 20, easing concerns about a potential U.S. delisting.
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After Nio's steep sell-off in the past year, Lee says the stock appears attractively valued at around a 1.7x forward enterprise value-to-sales ratio.
"This seems attractive given the improving outlook – NIO traded at a similar valuation only during 2H19-1Q20 when it faced sales slowdown, product recalls and financing challenges, while its current fundamental is stronger in terms of brand equity, sales growth, R&D capability, and improved cash flow," Lee wrote in a note.
Benzinga's Take: There's no question Nio has tremendous potential long-term upside given its early leadership position in a massive potential Chinese EV market. The stock is still an extremely high-risk bet given how early stage the China EV market is at this point, however, and Nio continues to face uncertainty surrounding its U.S. listing and a crackdown on Chinese stocks by U.S. regulators.
