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Nio Fundamentals Have Bottomed Out; COVID-19, Tesla Competition Keep BofA On Sidelines

Nio Inc – ADR (NYSE: NIO) reported a year-over-year decline in February deliveries, although the drop was not as worse as the industry-wide downturn in China

Benzinga · 03/10/2020 17:00

Nio Inc – ADR (NYSE: NIO) reported a year-over-year decline in February deliveries, although the drop was not as worse as the industry-wide downturn in China in the wake of the COVID-19 outbreak.

The Nio Analyst

Reviewing the data, BofA Securities analyst Ming Hsun Lee maintained a Neutral rating and $3.90 price target for Nio. (See his track record here)

The Nio Thesis

Nio's outperformance relative to the industry reflected the company's efforts in promoting its products, technologies and services through online traffic channels, including the NIO app, Hsun Lee said.

The analyst also noted the company recently privately placed $235 million short-term convertible notes at $3.50 per ADS to several Asia-based financial investors.

Related Link: Nio's History Of Capital Raises: A Look At The Chinese EV Manufacturer's Debt

"We believe the stock's fundamentals have bottomed out, but its volume sales are likely to be negatively impacted by the COVID-19 outbreak and the launch of Tesla's made-in-China Model 3," Hsun Lee wrote in a Tuesday note.

The company's improving product quality, according to BofA, is supported by the 100kWh battery pack and 20kW DC charing pile, also the third model – EC6 – and new ES8.

The faster than expected sale channel expansion and strengthening brand equity, however, is offset by potential financing risk, the firm added.

NIO Price Action

Nio shares were higher by 3.78% to $3.44 at time of publication.

Photo by chuttersnap on Unsplash