Chinese EV maker Nio (NYSE:NIO) disappointed with its April vehicle delivery numbers. It delivered 5,074 vehicles in April 2022 compared to 7,102 vehicles in the prior-year period. Management blamed ongoing supply constraints, and disruptions from COVID-19 for weaker delivery numbers.
In response to Nio’s April vehicle delivery numbers, Morgan Stanley analyst Tim Hsiao stated that this was largely anticipated given the lockdowns in China. Hsiao is bullish about Nio, while his price target of $34 represents 87.5% upside.
While Hsiao sees a strong upside in Nio, investors dumped its stock. The Nio ADR (American Depositary Receipt) has significantly underperformed over the past year.
Regulatory concerns and production headwinds weighed on its financial and operating performance. Given the selling, Nio stock has slumped over 54% in the past year.
What’s Ahead?
While Nio stock has declined quite a lot, management stated that the production has been recovering gradually, which is positive. Further, new model launches (including a mass-market brand) and expansion into new markets (it plans to enter Sweden, Denmark, Germany, and the Netherlands this year) augur well for growth.
As things are gradually looking up for Nio, TipRanks’ Hedge Fund Trading Activity tool shows that hedge funds, including Ray Dalio’s Bridgewater Associates, have been accumulating its shares.
The data shows that hedge funds increased their holdings in Nio stock by 216,000 shares over the past quarter.
Bottom Line
The gradual improvement in production, expansion in Europe, and new model launches provide a solid base for growth. Further, the increased adoption of EVs and infrastructure investments will likely support growth.
However, supply shortages and regulatory headwinds in China could continue to play spoilsport in the short term.
Of the 16 analysts providing recommendations on NIO stock, 14 recommended a Buy and two had a Hold for a Strong Buy consensus rating. The average Nio price target of $40.51 implies 123.4% upside potential to current levels.
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