As a measure of how hard Nio (NIO) stock has fallen this year, despite shares being up by 25% over the past week, the stock is still down 31% on a year-to-date basis.
That said, Deutsche Bank analyst Edison Yu thinks the next year is there for the taking for the Chinese EV maker.
“While this year has certainly been filled with unexpected speed bumps,” the analyst said, “we think the product supercycle is almost here and NIO will finally reap the benefits in full next year.”
Nio might have delivered a mixed Q2 report, along with a disappointing, albeit “better-than-feared” Q3 outlook, but the game should change considerably when Q4 kicks into view.
The company said it anticipates record monthly volume for each month in the quarter, reaching its apex in December with the inclusion of 10,000 ET5 units. Apparently the internal target is “even higher.”
Yu now expects full-year deliveries will reach 140,000 (a 5,000 increase on the prior forecast), suggesting ~57,000 deliveries in Q4 compared to Q3’s 32,000. Importantly, notes the analyst, despite being “older than competing EV product and more expensive,” NIO’s existing 866 models continue to sell “reasonably well.” And despite the new ES7 SUV’s introduction, monthly sales in August only declined by around 400 units sequentially.
“We believe this represents very thoughtful pricing segmentation and emphasis on branding+service which we continue to believe remain underappreciated by investors,” Yu noted.
But it’s the thought of what’s coming next which really excites Yu. Management stated that within a year, it expects that on a monthly basis the upcoming ET5 sedan will outsell the BMW 3-series (over 170,000 units were sold in 2021), which to Yu suggests a “very robust order backlog.”
As social media posts have been showing big crowds at NIO Houses in the lead up to the September 9 lock-in order time, Yu notes the initial reception for the ET5 has been “overwhelmingly positive.” Sales in 2H23 will also get an additional boost not only from 3 new models selling for a full-year (ET5, ET7, ES7), but also from a “revamp” to the existing 866 models, which will move up to the new NT2.0 platform next year with an upgraded sensor suite+chips.
Unsurprisingly, then, Yu rates NIO shares a Buy, backed by a $39 price target. Should the figure be met, investors will be sitting on returns of 79% in a year’s time. (To watch Yu’s track record, click here)
All in all, Nio gets the Street’s full support, with all 9 recent analyst reviews recommending to Buy, and all coalescing to a Strong Buy consensus rating. The average target stands at $31.84, providing room for 12-month gains of 45%. (See Nio stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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.
