Shares of Nio Inc. faced a downward trend on Friday following a sell recommendation from J.P. Morgan. The lack of new models from the China-based electric vehicle maker could potentially impact sales, especially with upcoming launches from competitors.
Analyst’s Recommendation
Analyst Nick YC Lai reduced his rating on Nio’s stock to underweight from neutral and significantly lowered the price target by 41%, now set at $5 from $8.50. This adjustment suggests a potential downside of 14.5% based on Thursday’s closing value.
Concerns and Market Comparisons
Lai acknowledged the delay in his downgrade but highlighted the recent stock decline due to slow January sales and investor worries about sales and earnings momentum for 2024. Year-to-date, the stock had dropped by 35.5%, outperforming the broader China-based automaker market’s 18% decline. In comparison, the iShares MSCI China ETF has fallen 2.4% while the S&P 500 index gained 6.7%.
Dual Concerns Going Forward
The concerns looking ahead are twofold for Nio. Firstly, with only one new mass market model, named “Alps,” scheduled for release this year – potentially by the fourth quarter, Nio may face increased competition in the mass market segment with new launches anticipated from rivals like XPeng Inc. and BYD Co. Ltd.
Revenue and Loss Estimates
Analyst Lai adjusted Nio’s 2024 revenue estimate down to RMB73 billion ($10.1 billion), below the current FactSet consensus of RMB78.9 billion, while widening the expected per-share loss to RMB8.38 from RMB7.69. These figures deviate from FactSet’s loss consensus of RMB6.41.
A Glimmer of Positivity
Despite the challenges, Lai highlighted that Nio has been successfully reducing costs and expenses while also trimming sales discounts to maintain margins in the face of competitor price cuts.
