Edison Yu's team explains why NIO stock is underperforming and points to several potential catalysts for it to perform better.
NIO stock has significantly underperformed its local peers and Tesla over the past three months, and Deutsche Bank's Edison Yu's team thinks that could change soon.
In a research note sent to investors Thursday, the team explained why NIO stock has underperformed and pointed to several catalysts that could see it do better.
NIO is down 7 percent since the beginning of August. By comparison, XPeng Motors stock traded in the US is up 15 percent, Tesla is up 71 percent and BYD is up 13 percent over the same period.
Yu's team believes this is mainly because NIO is struggling with a chip shortage and a lack of new products.
But that could change as NIO begins to ramp up marketing for its flagship sedan ET7, announces new products and technologies on NIO Day, and demonstrates a substantial volume recovery in the next two months.
The team believes that there are 2-3 potential catalysts that could help change the narrative on the stock. Here's what they say:
1) 3Q21 earnings on 11/9: management will provide 4Q guidance that shows large step-up in volume recovery for Nov/Dec and while official consensus is likely too high, we believe buy-side expectations have already been reset.
2) November monthly deliveries: likely reported on 12/1 and should confirm robust demand for existing models despite greater competition.
3) NIO Day: will be held on 12/18 and we expect new models/technology to be unveiled that should boost both investor and consumer sentiment.
Notably, the team also cautioned that risks including further constraints from the supply chain, a sudden shift in EV investor sentiment, and poor initial acceptance of new products could also invalidate these judgments.
In a separate research note earlier today, Yu's team raised their price target on NIO by $10 to $70, maintaining a Buy rating.
The team raised their forecast for NIO's deliveries in the next year to 160k from 150k, and raised their forecast for 2023 deliveries to 285k from 245k.
They also raised their delivery forecast for NIO in 2025 significantly to 750k from 465k.
As of press time, NIO is up 2.48 percent to $42.53 in pre-market trading on Thursday.