NIO Stock Charges Higher on Citi Upgrade

Shares of Chinese electric vehicle (EV) maker Nio (NYSE: NIO) have charged higher on Wednesday after receiving a bullish vote of confidence from Wall Street. Citi reiterated a buy rating on the stock while analyst Jeff Chung raised his price target from $58.30 to $72, which represents a 43% upside from Tuesday’s closing price.

As of 11:45 a.m. EDT on Wednesday, Nio shares were up 6%.

Boosting estimates for the years ahead

Many EV stocks have been relatively weak in recent months, in part over concerns around the global chip shortage that is impacting supply chains across countless industries. Local peer Xpeng (NYSE: XPEV), which already trades in the United States, just completed its public listing in Hong Kong, raising $1.8 billion in the process as investor sentiment rebounds. Nio is reportedly exploring a similar dual listing.

Citi is optimistic that Nio will report “robust” delivery volumes for the month of June, followed by strong sequential growth heading into the third and fourth quarters. Nio provides monthly updates for shipment volumes and is expected to disclose June volumes later this week. For reference, here are Nio’s quarter-to-date delivery figures for April and May.

MonthVehicle DeliveriesYOY Growth
April 20217,102125%
May 20216,71195%

Data source: Nio.

At the end of May, Nio had reached total cumulative deliveries of 109,514 vehicles, an impressive milestone for the young EV company.

Chung is modeling for Nio to deliver 93,000 total vehicles in 2021, up from a prior forecast of 90,000. The analyst also boosted his delivery estimates for 2022 and 2023. The company’s prospects warrant a higher valuation multiple, in Chung’s view, leading to the increased price target.

The price target bump comes less than a month after Citi had upgraded its overall rating on Nio from neutral to buy, which was based on recent weakness in the stock combined with the expectation of demand gaining momentum.

The biggest EV market in the world is only going to get bigger

China is already the largest EV market in the world, and adoption is expected to continue climbing thanks to supportive government policies. New energy vehicle (NEV)—which is the term used primarily by the Chinese government for the category—sales are expected to soar by 40% per year for the next five years, according to the China Association of Automobile Manufacturers (CAAM). NEV volumes in China are poised to reach 1.9 million this year.

Meanwhile, the United States is slipping with its share of EV production as major world powers compete for dominance in the EV revolution. The U.S. share of global EV production now stands at 18%, down from 20% in 2010, according to the International Council on Clean Transportation (ICCT).

“The U.S. auto industry can’t afford to continually be five years behind the rest of the world in one of the world’s most promising and strategically important sectors,” ICCT Director Nic Lutsey said.

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