The ADR (American depositary receipt) of Chinese EV giant Nio (NIO) is under pressure, as near-term supply-chain issues are leading investors to liquidate their holdings.
TipRanks’ Stock Investors tool indicates that investors currently have a Very Negative outlook on Nio ADR, with 3.7% of investors who hold portfolios on TipRanks decreasing their exposure in the past 30 days. I am neutral on Nio stock.
Owing to the investors’ pessimism, Nio ADR erased a substantial portion of its gains and has fallen 22% year-to-date. (See Nio stock charts on TipRanks)
It’s worth noting that volatility in the semiconductor supply is eating into the planned production of automotive companies, including Nio. Citing uncertainty and volatility of semiconductor supply, Nio recently revised its Q3 vehicle production lower.
Nio now projects to deliver 22,500 to 23,500 vehicles in Q3, down from its previous forecast of 23,000 to 25,000 vehicles.
The increased adoption of EVs, and favorable government policies positively impact EV companies. However, the continued uncertainty surrounding chip supply is a concern.
Highlighting the semiconductor shortage issue, Tim Hsiao of Morgan Stanley stated that the supply crunch has elevated output uncertainty. Nevertheless, the analyst kept a Buy rating on Nio stock, with a price target of $64 (53.9% upside potential).
Hsiao is not the only analyst with a bullish outlook on Nio ADR. On TipRanks, NIO has received seven positive analyst reviews, for a unanimous Strong Buy consensus rating.
The average Nio price target of $66.01 implies 58.9% upside potential to current levels.
Meanwhile, TipRanks’ Hedge Fund Trading Activity tool shows hedge fund managers increased their cumulative holdings in Nio by 868,700 shares in the last quarter. However, confidence in Nio is currently Neutral.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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