The supply-chain constraints that have been crippling world economics, aggravated by the COVID-related lockdown in Shanghai, have weighed heavily on automakers, particularly electric vehicle (EV) makers. Recently, Mizuho (MFG) Securities analyst Vijay Rakesh cooled down his estimates for a slew of EV companies for Q2 as the quarter comes to an end.
One of the EV companies to have its estimates cut by Rakesh was Nio (NIO), whose stock price has risen by around 37% this month thus far. The analyst trimmed his estimates for Q2-2022 revenues from RMB 9.8 billion to RMB 9.34 billion. This led to a trimming of the full year’s estimates as well, with full-year 2022 revenue estimates dropping to RMB 94 billion from RMB 94.4 billion.
Weakness in consumer buying trends is likely to be a headwind in the current quarter and is expected to remain an overhang in the second half of the year as well. Rakesh also lowered the stock’s price target to $48 from $55.
However, the analyst maintained a Buy rating on the stock, encouraged by the strong EV demand that is prevailing despite the higher prices and longer lead times. The second half of 2022 is expected to see some easing of supply-chain disruptions and greater capacities at foundries, leading to improved production of new models.
“Despite elevated macro risks, BEV (battery electric vehicle) could see strong 2H ramps as China re-opens and demand improves, with BEVs potentially up >55% 2H (over) 1H,” said Rakesh.
Nio’s new model —the ET7, is ramping up well, according to the analyst, who also believes that its upcoming new models, the ET5 and ES7, are on track to launch in the third quarter.
Rakesh was upbeat about Nio’s leading position in the premium EV segment. Moreover, technical expertise in battery technology and ADAS (advanced driver-assisted systems) protocols are expected to drive Nio’s growth.
Additionally, the analyst pointed out that Nio is also expanding globally, which can be a significant growth driver in the future.
Wall Street’s Take
All other Wall Street analysts are also bullish on Nio, with a Strong Buy rating based on 12 unanimous Buys. The average Nio price target is $36.52, which indicates 59% upside potential from current levels.
The Bottom Line
The easing of supply chains, lifting of China’s lockdowns, and regulatory approvals for Chinese stocks are expected to be positive catalysts to push Nio’s business forward, despite some near-term headwinds.
