It's another week, and Chinese automakers are still on analysts' minds. Another Chinese automaker is grabbing attention, while XPeng (XPEV) and Li Auto (LAAOF) are grabbing the attention of other Western firms.
News for NIO
Despite being publicly traded on the New York Stock Exchange, there is a strong chance that you have never heard of Chinese electric automaker NIO, and that is okay.
However, unlike manufacturers like BYD, whose reputation for cheap cars led them to develop their first supercar, NIO (NIO) started on the opposite end.
In 2019, Richard Hammond led a featurette on the Amazon Prime automotive show The Grand Tour featuring NIO's EP9 supercar. Prior to filming the test, Hammond crashed a similarly powerful electric sports car on a hillclimb in Switzerland, but he found the NIO to be a different beast altogether.
"That direct, immediate power you get from these electric supercars is like nothing else. It's like one minute, I'm here and then, bam, I'm over there," Hammond exclaimed from the driver's seat of the NIO. "It's like driving a jet engine."
Today, NIO's bread and butter is not hardcore, track-only sports cars like the EP9 but a line of crossovers and sedans. In March 2024, the automaker also launched a new sub-brand called Onvo, which targets the mass-market sector.
However, unlike its contemporaries, BYD or Li Auto, NIO is not profitable.
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Despite recording stronger margins and record sales during its second quarter 2024 earnings on September 5, NIO recorded a net loss of an equivalent of $721.2 million.
The same day, Citibank analysts opened what it calls a “30-day positive catalyst watch," anticipating revenue growth as the company scales up production. Additionally, Citi noted that NIO is trading at a 30-40% discount compared to rival XPeng, which could open up an arbitrage opportunity. Analysts at Citi still keep a Buy rating but have lowered their price target from $8.50 to $7.
Over at JPMorgan, analyst Nick Lai upgraded NIO stock rating from Neutral to Overweight. He raised its price target from $5.30 to $8, noting that he expects “a sharp decline in cash burn and better operating cash flow” in the remainder of the year.
“With the stock price halving YTD and hence expectations low, we believe Nio may well exhibit a relief rebound beyond year-end, driven by financial and operational turnaround,” Lai wrote in his analyst note. “Specifically, we project that a sharp decline in cash burn and better operating cash flow in 2H24 will greatly increase investors’ confidence in Nio’s financial status."
Morgan Stanley analyst Tim Hsiao updated its price target to $6.10. He listed an Overweight rating on NIO, while Bank of America analyst Ming Hsun Lee maintained a neutral rating and raised its price target from $5 to $5.30.
Bear moves for Li Auto
On August 28, Chinese electric automaker Li Auto reported better-than-expected results in its Q2 2024 earnings report despite thinned margins in a "price war" driving prices down in the People's Republic. This included an increase in vehicle deliveries of 25.5%.
These results drove analysts in different directions, but most notably, JPMorgan analyst Nick Lai recommended investors reconsider their positions if the manufacturer doesn't develop new EVs by 2025.
This week, another analyst at a Western back sounded the alarm.
On September 4, analysts at Citibank downgraded Li Auto stock from Buy to Neutral and decreased their price target from $26.20 to $21.60.
In their note, they justify the downgrade on concerns of Li Auto's increased competition from other firms like Huawei and Denza, which may push the company to shorten the lifespan of its L7, L8, and L9 models even sooner. The firm's first car, the Li ONE, had a lifespan of just 16 months on the market. The L7, L8, and L9 were introduced in 2022, and the analysts anticipate the introduction of their replacement model by 2025.
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Bull moves for XPeng
Previously, analysts from JP Morgan, Barclays, Bank of America, and Citibank lowered the price targets of Chinese EV automaker XPeng, citing second-quarter 2024 losses and revenue that disappointed them.
Last week, Macquarie analyst Eugene Hsiao upgraded its Neutral rating on XPeng stock to Outperform, with a $10 price target, citing that the brand's new MONA M03 is "a similar name and similar car" to Tesla's Model 3 "but at nearly half the price."
Introduced last week, the XPeng MONA M03 can prove to be the brand's "Tesla Moment," as it seeks to edge the Tesla Model 3 in every aspect, including price.
Priced from the equivalent of about $16,800 to around $21,850, the XPeng MONA M03 can provide a compelling decision for Chinese auto buyers looking for something that edges Musk's Model 3s.
JPMorgan analyst Nick Lai thinks so, too. In his analyst note published on September 4, Lai said that interest in the MONA M03 could be the driver behind an increase in deliveries for the rest of the year, which he estimates at 45,000 deliveries in Q3 2024 to about 80,000 in Q4 2024.
Lai also upgraded XPeng shares to Overweight from Neutral with a price target of $11.50 from $8.
Tesla dreams or delusions?
With nearly a month to go until Tesla's Robotaxi event on October 10, which is reportedly set to take place on the Warner Bros. Studios backlot in Burbank, California, investors and analysts have many expectations that may or may not be fulfilled.
Morgan Stanley analyst Adam Jonas has high expectations. On September 5, he reiterated his firm's stance on Tesla being the "top pick" in the automotive sector, cautioning investors to “keep expectations well managed” but reiterated the idea that surprises may be ahead.
He speculated that the event would showcase a demonstration of FSD and a fully autonomous ‘cyber-cab’ on "a closed/semi-closed course," but he did not rule out any other ideas that the seemingly Willy Wonka-esqe Tesla engineers and designer have up their sleeves.
“Could we see an electric plane? A boat? The latest gen Optimus robot flipping burgers at a Tesla Diner?" Jonas gleefully asked those reading his analyst note.
We may have to wait and see.
Morgan Stanley maintains its Overweight rating on Tesla shares and has a price target of $310.
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