Nio Analyst Says Fundamentals Have Bottomed Out, Valuation Reflects Sales Momentum

Nio Inc – ADR (NYSE: NIO) reported strong deliveries for December on Monday, capping a strong second half of 2019.

Benzinga · 01/06/2020 19:07

Nio Inc – ADR (NYSE: NIO) reported strong deliveries for December on Monday, capping a strong second half of 2019.

The Nio Analyst

Bank of America Securities analyst Ming-Hsun Lee reiterated a Neutral rating on Nio and increased the price target from $3.80 to $3.90.

The Nio Thesis

Nio maintained the strong sales momentum seen since August, reporting deliveries of 3,170 units, Hsun said in a Monday note. (See the analyst's track record here.) 

The analyst attributed the solid shipments in the fourth quarter to strengthening brand equity, fast channel expansion and more auto financing for consumers.

Factoring in the 2019 vehicle deliveries of 20,565 units, BofA raised its 2020 and 2021 shipment estimates by 1.1% and 1.4%, respectively, to 40,000 and 54,000 units.

A faster-than-expected sales channel expansion will drive further upside, Lee said. 

Nio's fundamentals are improving, and this is reflected by improved volume sales and margins, an improvement in product quality following the introduction of 100kWh battery pack and 20kW DC charging pile and the introduction of the new ES8 and a third model, the EC6, the analyst said.

That said, BofA sees potential refinancing risk for Nio. 

"While we believe the stock's fundamentals have bottomed out, the current valuation partially factors in the improved sales momentum. Thus, we reiterate our Neutral rating on NIO." 

Nio Price Action

Nio shares were down 1.96% at $3.76 at the time of publication. 

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Photo courtesy of Nio.