After months of underperformance, the ADR (American Depositary Receipt) of the Chinese EV maker Nio (NYSE:NIO) reversed course and closed 17.3% higher on Monday.
While there was no major news to fuel such a bounce, overall buying of EV stocks led to an increase in Nio’s price.
Nio recently announced strong vehicle delivery numbers for Q4 despite ongoing supply-chain headwinds. It delivered 25,034 vehicles in Q4, well within management’s guidance range of 23,500 to 25,500. Further, 2021 deliveries soared 109.1% year-over-year to 91,429.
What’s Ahead for Nio?
While Nio stock bounced, it is still down about 22.6% this year. Further, it has lost over 45% of its value in the last six months. The significant drop in its price has led to a compression in its valuation.
Highlighting its valuation, Mizuho Securities analyst Vijay Rakesh stated that Nio stock is trading at “~5x C22E P/Sales,” which compares favorably to Tesla’s multiple of ~14x. Further, Rakesh’s bullish view is based on Nio developing more affordable models, global expansion (Europe expansion underway), and EV penetration accelerating in China.
It’s worth noting that Nio will launch three new models and plans to enter five new countries in Europe in 2022.
Overall, new model launches, a ramp-up in production, and a European expansion bode well for growth. However, supply-chain constraints and regulatory concerns could remain a drag.
Significant Upside
Along with Rakesh, most Wall Street analysts have a bullish outlook on Nio stock. Its Strong Buy consensus rating is based on 8 Buy and 1 Sell recommendations.
Further, due to the massive correction in its price, Nio’s price forecast on TipRanks shows that it could more than double. The average Nio price target of $59.46 implies 142.6% upside potential to current levels.
Moreover, hedge funds remain positive on Nio stock. TipRanks’ Hedge Fund Trading Activity tool shows that hedge funds have added 3.5M Nio shares over the past three months.
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