Nio stock will finally "shine bright" after unexpected speed bumps, a leader among China EV startups, a Wall Street firm said Monday. Nio, an emerging Tesla rival, surged, reclaiming a key technical level and eyeing an early buy point.
Coming out of a mixed earnings report last week, Nio should see two factors drive its outperformance vs. other EV upstarts, Deutsche Bank analyst Edison Yu wrote in a note to clients Monday.
First, the upcoming, midsize ET5 electric sedan could become a top-selling premium model "with initial customer reception being exceedingly positive," Yu said. He cited social media buzz.
Nio is set to begin producing the ET5, its third new EV of 2022, in late September. It had launched the full-size ET7 sedan in March. The ES7, a new electric SUV, hit the road in August.
Secondly, older-generation Nio electric SUVs, including the ES6, ES8 and EC6, continue to sell solidly due to thoughtful pricing and strong service, despite being more expensive than rival EVs, Yu said.
Nio will upgrade those older models over the next year.
Yu again called Nio stock his top China EV pick and continues to expect a "product supercycle" as multiple new EVs hit the market. He rates Nio stock a buy with a 12-month price target of 39.
Nio Stock Extends Gains, Eyes Buy Point
Shares of Nio gapped up 13.7% to 21.79 in big volume on the stock market today, rising for a fourth consecutive session. Nio stock regained the 50-day moving average Monday but remains below the 200-day average. The China EV stock also continues 51% off the 52-week high, but its relative strength line is improving. It had set a nearly two-year low in May due to wilting EV sales amid supply constraints.
Nio stock again shows a bottoming base. Monday's powerful move above the 50-day moving average and a trendline could be seen as an aggressive entry, but the 200-day moving average is approaching. Investors could use a move above the 200-day line as an early entry, modestly below the 24.44 official buy point.
Startup rival Li Auto fell 1% to 26.06 Monday, near three-month lows. Xpeng gained 2% to 16.35, near all-time lows. China EV giant BYD added 2%, trying to recover from huge losses before Labor Day.
Tesla rose 1.6% Monday, extending a 10.9% rally last week.
Nio Earnings Disappoint But Outlook Offset
Nio rallied 8.1% last week despite a worse-than-expected loss for the second quarter.
However, the China EV upstart gave a better-than-feared Q3 delivery outlook. It pointed to robust demand for multiple new EVs as well as expansion in Europe, a top market for Tesla.
"For Q4, management indicated it expects to deliver record monthly volume every month with a peak in December that includes 10,000 ET5 units (internal target even higher)," Yu wrote Monday.
The analyst raised his full-year Nio delivery forecast by 5,000 units to 140,000. That implies roughly 57,000 in Q4 vs. an estimated 32,000 in the current third quarter.
The Chinese maker of premium EVs is also expanding in Europe.
Some reports suggest that Nio could launch a more affordable brand within the next year or so.
