Corporate leadership changes can create uncertainty, stirring doubts regarding a company’s stated plans and intentions. This can be especially unsettling for a firm that seems to be headed in the right direction.
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Which brings us to Nio (NIO).The company has certainly had a tough 2024, although the Chinese EV maker has some positive signs to point to. These include growing production numbers and improving profit margins.
However, NIO will now be forced to reckon with a shifting leadership picture following the resignation of Chief Financial Officer Feng Wei. He is being replaced by Senior Vice President for Finance Stanley Qu, who has been working at the company since 2016.
While expecting the road to become a bit bumpy in the near future, DBS analyst Rachel Miu does not believe the new personality will present a long-term problem for the EV maker. “Given Mr Qu’s extensive experience in the finance industry, we believe he will be able to assume his new role quite smoothly,” writes the analyst.
Miu notes that the company has gone through changes at the top before. If past is prologue, this could lead to some near-term volatility. “After the previous CFO Mr. Louis Hsieh’s resignation on 28 Oct 2019, NIO’s share price fell by about 8% in the following two days,” acknowledges Miu.
The analyst continues that “the departure of a key executive may raise investors’ concerns about a company’s operational and financial health and short term selling pressure is expected.” Indeed, that scenario appeared to play out in the immediate aftermath of the announcement as NIO’s stock dropped by 5%.
All that being said, the analyst argues that fears of long-term fallout are misplaced, as the company’s performance should quickly counterbalance these worries. “We believe the strong 2Q24 deliveries (57.4k in 2Q24, +144% y/y and beating company’s target of 54-56k) will provide some share price support,” writes Miu, who also expects deliveries of the new ONVO L60 model scheduled for September will be a “potential sales volume driver” and help boost the share price.
Miu is therefore reaffirming her Buy rating along with a 12-month price target of $7.10, which represents upside of 58% from current levels. (To watch Miu’s track record, click here)
Wall Street has a variety of views regarding Nio’s prospects. With 5 Buys, 6 Holds, and 1 Sell, the stock claims a Moderate Buy consensus rating. The average price target stands at $6.19, implying shares will deliver returns of ~37.5% over the next year. (See Nio stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
