Nio (NYSE:NIO) investors have faced plenty of challenges in recent years, but recently, the tide has shifted. In the past month alone, the stock surged 65%, reflecting a clear shift in sentiment toward the Chinese EV maker.
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The company recently added a new vehicle to its lineup with the release of the L60, the debut SUV for its ONVO mass-market brand. Nio has also benefited from China’s stimulus measures intended to boost the economy and the announcement of a direct ~RMB3.3 billion cash injection from strategic investors.
Citi analyst Jeff Chung thinks the price extracted for the cash boost is worth paying. “In our view,” the analyst said, “the strategic investment of Rmb3.3bn at the cost of limited 3.8% equity dilution of Nio China can enhance its cash resources and further reduce the refinancing needs of Nio.”
Chung also highlights growing “orders-to-sales momentum” for Nio. The overall orders-to-sales ratio increased from 1.20x in May to 1.34x in September (up to the 22nd), signaling growth in the sector as it heads into peak car sales season. Nio’s own orders-to-sales ratio for September stands at 3.33x, significantly surpassing the blended average. “Looking ahead into 4Q,” Chung adds, “we expect orders-to-sales momentum to likely improve further due to car sales high season and stimulus roll-out.”
Moreover, there’s the potential boost from Onvo’s order intake during the Golden Week holiday, particularly ahead of the October 8 cutoff for promotional benefits. “If Onvo is successful,” Chung summed up, “it may strengthen investors’ confidence on its Firefly brand.”
All of the above has led Chung to raise his 2024-2026 volume estimates from a respective 230/364/451,000 to 252/413/500,000 units.
Additionally, Chung has increased his price target on NIO from $7 to $8.9, suggesting the stock will gain 23% over the one-year timeframe. Unsurprisingly, Chung’s rating stays a Buy. (To watch Chung’s track record, click here)
Overall, the Street’s reviews split into 6 Buys, 4 Holds and 1 Sell, all culminating in a Moderate Buy consensus rating. However, most seem to think the stock has now overshot somewhat; at $5.97, the average price target implies a decline of ~11% is in the cards for the next 12 months. (See Nio stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
