Nio Inc (NIO)

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NIO Stock Can Double, Says Analyst. One Big Overhang Is Gone for the EV Maker.
By: Barron's | November 23, 2021

Chinese electric-vehicle maker NIO has lagged behind peers so far in 2021. The underperformance of its American depositary receipts—U.S.-listed securities—could be ending.

Citigroup analyst Jeff Chung wrote Tuesday that recent weakness in NIO (ticker: NIO) ADRs was related to the company selling shares. Those sales are done and he sees positive catalysts for the stock coming in 2022.

He rates NIO ADRs at Buy and has an $87 price target, more than 100% higher than recent levels.

NIO (ticker: NIO) ADRs rose 7% Monday, closing at $41.49. Monday’s rise was related to a late Friday news release in which NIO said it had finished selling about 53 million ADRs raising about $2 billion in cash.

Since that sale was announced in early September, NIO ADRs slipped about 5% until the capital raise finally finished. XPeng (XPEV) ADRs rose about 12% over the same span. Li Auto (LI) ADRs dipped a little, falling about 1%, but Tesla (TSLA) stock roared ahead, rising more than 50% over the comparable span.

NIO was the worst performer of that group, but the ADRs are making up for some of the underperformance again on Tuesday. NIO ADRs are up another 3.8% in early Tuesday trading. The S&P 500 and Dow Jones Industrial Average are both up about 0.2%.

The removal of the sale is one positive factor for the NIO. Looking ahead, Chung sees November vehicle deliveries, an analyst event on Dec. 18, and pricing details for the company’s new ET5 sedan helping to lift the ADRs.

The ET5 should compete with the likes of a Tesla Model 3.

Chung is a NIO bull, and his price target is the highest on the Street, according to Bloomberg. His peers on Wall Street also love NIO. About 84% of analysts covering the company rate NIO at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

The average analyst price target stands at about $60, about two-thirds of Chung’s price target, but it still implies about 44% gains from recent levels.

Coming into Tuesday trading, NIO ADRs are down about 15% year to date, which has helped them grow into their valuation. At the end of 2020, ADRs traded for about 14 times estimated next year’s sales. Shares are now trading for about 7.5 times estimated next year’s—or 2022, in this case—sales.

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