Shares of Chinese EV maker Nio (NYSE:NIO) have been on a long losing streak with only short periods of relief over the past few years. However, a recent rally has been taking place since the stock bottomed out in mid-April, driving the stock’s value up by a substantial 42% during this time.
The latest leg up took place last week, which Morgan Stanley analyst Tim Hsiao puts partly down to “positive movement of the EV sector.” However, Hsiao emphasizes that the primary driving force behind this uptick was the heightened expectations surrounding the company’s anticipated Q2 deliveries, projected to reach 55,000 units.
This optimism is fueled by the indication that Nio’s cumulative sales for April and May are poised to exceed 36,000 units, with May deliveries alone surpassing the significant threshold of 20,000 units as indicated by Nio’s mobile app. Only once has Nio crossed the 20,000 mark in monthly deliveries, having reached a monthly sales record of 20,462 units last July. “Our recent checks also suggest order momentum stayed solid lately with weekly order run-rate of around 6k,” Hsiao goes on to add.
That said, with Nio about to announce Q1 earnings later this week (Thursday, June 6), the main focus will likely be on maintaining “order sustainability” into June and the margin trends seen in the second quarter. “Order momentum” might depend on the renewal of promotions, while Q2 margins will be influenced by the “interplay of scale benefit and discount.”
So, what about sustaining the bullish sentiment around the stock? Heading into the print, Hsiao thinks that it is “likely to stay upbeat.”
“However,” the analyst goes on to say, “given raised expectations, further upside should hinge on more bullish comments on order/margin outlook as well as further color on Onvo [Nio’s new sub-brand], if any.”
All told, Hsiao keeps a positive stance, rating NIO shares as Overweight (i.e., Buy) while his $10 price target factors in 12-month returns of 85.5%. (To watch Hsiao’s track record, click here)
That is one of the Street’s more bullish takes. The average target currently stands at $6.66, representing an upside of 23.5% from current levels. Rating-wise, based on a mix of 8 Buys, 9 Holds and 1 Sell, the analyst consensus rates the shares a Moderate Buy. (See Nio stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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