NIO Stock Soars on Strong Deliveries and Wall Street Upgrade

Shares of Chinese electric vehicle (EV) maker NIO (NYSE: NIO) started off the week strong, jumping on Tuesday by as much as 8% after reporting strong vehicle deliveries. Additionally, the company got several votes of confidence from Wall Street. 

Here’s what NIO investors need to know.

Deliveries nearly doubled in May

NIO said that it delivered 6,711 vehicles in May, representing a year-over-year increase of 95%. The total included 1,412 ES8 SUVs, 3,017 ES6 SUVs, and 2,282 EC6 compact SUVs. As of the end of May, the company has now cumulatively delivered 109,514 cars overall.

Supply chain challenges related to the ongoing global chip shortage impacted unit volumes last month, according to NIO, but the company is confident that conditions are improving and that it can accelerate deliveries in June to partially compensate for delays in May. NIO reiterated its delivery guidance of 21,000 to 22,000 vehicles in the second quarter. The company had delivered 7,102 vehicles in April, bringing its quarter-to-date total to 13,813 with a month remaining in the quarter.

Wall Street is bullish on NIO

Following the delivery numbers, Citi upgraded its rating on NIO from “neutral” to “buy” while analyst Jeff Chung adjusted his price target from $57.60 to $58.30. The analyst believes that there has been a “strong demand recovery” in recent months following Shanghai auto shows.

“After the recent stock price correction from the peak in 4Q20, we believe this is a good re-entry point for the long-term investors, given the ongoing re-rating catalysts,” Chung wrote in a research note to investors. Citi boosted its delivery estimates and now expects NIO to deliver 90,000 vehicles this year, with volumes expected to grow to 155,000 in 2022 and 225,000 in 2023.

Morgan Stanley also chimed in with an upbeat note. Analyst Tim Hsiao reiterated an overweight rating (equivalent to a buy) alongside a price target of $64. Morgan Stanley isn’t too concerned about the temporary delays, which are short-term in nature, while the constraints are starting to ease.

“We think supply dynamics will stay fluid but have been improving; this, together with sales channel expansion and growing order backlog, bodes well for volume take-off in 2H21,” Hsaio commented.

NIO’s outlook remains rosy

Investors seem encouraged that NIO is maintaining its delivery outlook for the second quarter. The forecast range represents growth of 103% to 113% from the second quarter of 2020. Those deliveries are expected to translate into revenue of $1.24 billion to $1.3 billion, which represents growth of 119% to 129%.

Importantly, the challenges are primarily on the supply side of the business, and consumer demand remains robust. Management noted that the company’s “order momentum remains solid” on the last earnings call, as NIO has created a powerful lifestyle brand in the world’s largest EV market.

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Evan Niu, CFA owns shares of NIO Inc. The Motley Fool owns shares of and recommends NIO Inc. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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