Nio (NYSE: NIO) shares have recovered 15.1% over the past three months but are still down nearly 39% year-to-date. Supply chain challenges, a persistent shortage of chips, macro pressures, and COVID-19 restrictions have hit Nio and other electric vehicle (EV) makers. Nio shares were also impacted by the risk of delisting from the U.S. stock exchange, but the company addressed this fear by listing its shares on the Hong Kong and Singapore stock exchanges. While near-term pressures continue to bother Nio investors, Wall Street analysts are highly bullish on the stock.
Nio’s Future Looks Promising
Nio is one of the leading EV makers in China, the largest EV market in the world. The company’s Battery as a Service (BaaS) and Autonomous Driving as a Service (ADaaS) offerings give it an edge over its rivals. Nio continues to invest in technologies to support innovation.
In June, NIO launched its ES7 model, a mid-large five-seater SUV, which is based on the company’s NIO Technology 2.0 platform. The company has also enhanced its ES8, ES6, and EC6 vehicles. The deliveries of the ES7 SUV and the upgraded versions are expected to commence in August.
Nio’s June deliveries increased by 60.3% year-over-year to 12,961 vehicles, reflecting a strong recovery following disruptions caused by lockdowns. The company’s second-quarter deliveries grew 14.4% year-over-year to 25,059. However, Q2 deliveries declined compared to 25,768 deliveries in the first quarter, due to COVID-19 restrictions in China.
While Nio might be under pressure due to supply chain woes over the near term, the company’s long-term prospects look bright, based on the robust demand for EVs in China and other major markets, like Europe. After making its way into Norway, Nio is entering Germany, the Netherlands, Sweden, and Denmark. Nio aims to expand its footprint to 25 countries and regions by 2025.
Wall Street is Highly Bullish on Nio
Last month, HSBC analyst Yuqian Ding raised his price target on Nio stock to $28 from $26 and reiterated a Buy rating, based on a strong conviction in the company’s fundamentals. Ding highlighted the rebound in Nio’s sales volumes and expects monthly volume to continue to improve, driven by the deliveries of three new models in the second half of 2022. The analyst also expects volumes to benefit from the expected launch of new models beyond 2022.
Overall, Nio scores a Strong Buy consensus rating based on 10 unanimous Buys. The average Nio price target of $33.66 implies 72.70% upside potential from current levels.
Conclusion
Wall Street analysts are highly bullish on Nio stock based on its strong position in the Chinese EV market, expansion into Europe, and its BaaS offering. Analysts are looking beyond the company’s near-term challenges and see strong upside potential from current levels.
As per TipRanks’ Hedge Fund Trading Activity Tool, hedge funds have increased their holdings in Nio by 3.5 million shares in the last quarter. Overall, the Hedge Fund Confidence Signal is Very Positive for Nio based on the activity of seven hedge funds in the most recent quarter.
