A team at Everbright Securities lowered its earnings forecast and price target for NIO after the company announced its second-quarter earnings report.
In a research note released Friday, the team said they are bullish on NIO's steady volume growth, scale effects, and long-term gross margin improvement prospects from higher BaaS and NOP take rates.
However, the team lowered its earnings forecast for NIO in light of accounting standard adjustments and the trend of increasing costs and expenses due to the broadening of its overseas market presence.
The team expects NIO's Non-GAAP net loss attributable to the parent company to expand by 14 percent and 13 percent to about RMB 3.5 billion and RMB 1 billion in 2021 and 2022, respectively.
They expect NIO's Non-GAAP net income attributable to the parent company to decline 12 percent to approximately RMB 2.4 billion in 2023.
In light of the lower earnings forecast, the team lowered their price target on NIO to $48.53 and maintained their "Buy" rating.
The team's previous price target on NIO was $50.57 on May 9, and the latest price target is 4 percent lower than the previous one and implies 14 percent upside potential from the stock's closing price on Thursday.
Despite the price target cut, the team believes that China's electric vehicle industry is in the early stage of penetration release, and NIO is expected to expand its user base by broadening its mid-to-high-end brands.
The outlook for rising industry penetration driven by the continued release of demand for new energy vehicles in China is promising, the team said.
NIO's core strength is its clear high-end positioning, but it may face a bottleneck in long-term development. The company's entry into new markets through sub-brands is expected to expand user scale, the team said.
"We believe NIO is one of the most clearly planned new car makers in terms of current strategic concept, platform and model planning, business model and operation management, and technology reserve," the note wrote.
The team is optimistic about NIO management's philosophy of further increasing R&D investment and direct store expansion, as well as NP2's new platform models and technology reserve capabilities in core areas such as software and algorithms.