Deutsche Bank has initiated coverage on Chinese automaker Nio with a Buy rating and $24 price target, representing a 33 percent upside potential from Friday's close.
Nio shares went down by 3.85 percent on Friday and another 3 percent in pre-market trading on Tuesday after the US long weekend as the broader market is still plunging following last week's tech rout.
There is an emerging class of Chinese automakers backed by large, well-capitalized tech titans and "ambitious" local governments looking to disrupt the auto industry: Nio, Xpeng, Li Auto, and WM Motor, Deutsche Bank analyst Edison Yu said a research note.
Given its stronger brand perception, higher sales volume, focus on the premium SUV segment, and "battle-tested" operational track record, Nio is the leader of "Fab Four", said the analyst.
Yu said all the four EV makers can co-exist with Tesla in China "as there is still plenty of runways to capture market share away from traditional ICE automakers."
With the China electric vehicle market already the world's largest and now "inflecting upward after the recent downturn," Nio is well-positioned to take a share in the premium segment, said Yu.
This is the latest bull rating from a Wall Street firm.
Earlier this month, Credit Suisse analyst Bin Wang has raised the price target of Nio by 42.86 percent from $17.50 to $25, a new Wall Street high, with an “outperform” rating.
Wang noted that Nio's August delivery volume hit a record high of 3,965 units, up 104% year-over-year and 12% month-over-month, close to its current maximum capacity of monthly 4k units.
At the end of August, UBS raised its rating for Nio from "sell" to "neutral", bumping its price target from $1.00 to $16.30 which represents a jump of 1,530%.
The bank's analyst Paul Gong pointed out that Nio's fundamentals have improved with its second-quarter earnings report and third-quarter guidance showing a recovery in auto sales and profitability.
Gong said Nio's successful fundraising in June, amid strong demand for electric vehicles in the global market and a recovery in China, eased his earlier concerns about the company's balance sheet.
Chinese analysts are also optimistic about Nio.
Earlier today, cnTechPost reported that GF Securities analysts expect Nio sales to improve further with the new EC6 model's performance highly anticipated in their latest report.
The report notes that Nio unveiled the price for the EC6 on July 24, 2020, and will be delivered in September, priced at RMB 368,000.
At the end of August, Chinese investment bank CICC believes that this will improve the company's gross margin, thus injecting new momentum into its car sales and performance improvement.
In a report published on August 21 after the launch of the BaaS, CICC maintains Nio's Outperform rating. It maintained Nio's 2020 earnings forecast unchanged and raised its 2021 earnings forecast by 6.8% to -RMB 4.4 billion as the positive impact of the BaaS solution on Nio's gross margin will be gradually reflected in the long term.
