For NIO Stock, Worst Might Be Over, Says Analyst -- Barrons.com

Dow Jones2022-11-22
Al Root 

Nearly everything has gone wrong for the Chinese electric-vehicle maker NIO this year. That could be changing.

Deutsche Bank analyst Edison Yu believes the worst may finally be over. While supply-chain problems and production delays persist, he sees things getting better early in 2023 "supported by the government's gradual pivot away from COVID zero," wrote the analyst in a Monday research report. "The key to watch will be December sales as NIO will likely need to deliver something close to 20,000 units in volume to demonstrate execution is indeed improving."

NIO has been delivering closer to 10,000 vehicles a month for the past few months. Production capacity has been growing, but parts shortages and lockdowns to fight the spread of Covid-19 have constrained production.

At the same time, costs have risen as a result of inflation, and other Chinese EV makers have been cutting prices, weighing on earnings. Rising interest rates in the U.S. and tension between Washington., D.C., and Beijing have hurt the valuation of NIO stock (ticker: NIO).

The issues have added up. NIO shares are down about 69% year to date and off about 48% over the past three months. Shares of XPeng $(XPEV)$ are off about 85% so far in 2022 and 65% over three months, while Li Auto $(LI)$ stock is down about 46% year to date and 42% over three months. The Hong Kong-traded stock of BYD (1211.Hong Kong), a bigger EV maker than those three, is down 31% this year and off 34% over three months.

Yu says the launch of new products will help the stock as the calendar rolls into 2023. NIO has two new models for the first half of this coming year.

Yu isn't alone in his bullishness. Almost 90% of analysts covering the stock rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%.

The average price target among analysts is at about $31 a share, down from about $43 at the start of the year. Analysts have cut their target prices as shares fell.

NIO stock wasn't getting a boost from Yu's bullish view in Monday trading. Shares were off about 6% at $9.84, while Hong Kong's Hang Seng Index was down 1.9%. The S&P 500 and Nasdaq Composite fell 0.2% and 0.3%, respectively.

Write to Al Root at allen.root@dowjones.com

 

(END) Dow Jones Newswires

November 21, 2022 11:06 ET (16:06 GMT)

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