DBS analyst Rachel Miu highlights a potential opportunity in Nio (NYSE:NIO) stock despite its struggles, including an 86% decline over three years. Key points include record deliveries in Q3, a recent Rmb3.3 billion cash infusion improving financial stability, and expansion plans in the Middle East. Miu rates Nio shares a Buy, raising the price target to $20.3, suggesting a 53% appreciation. The overall analyst consensus is a Moderate Buy, forecasting ~21% returns over the next year.
Being a Nio (NYSE:NIO) investor hasn’t been easy for quite some time. Amid a downturn in EV market sentiment and fierce competition in China – the world’s most challenging EV market, where an intense price war has been taking place – Nio shares have shed 86% over the past three years, including a 42% decline year-to-date.
The underlying issue is clear: although Nio is selling more cars, it’s making less profit on each one. To make matters worse, the company has yet to achieve profitability and continues to burn through cash.
That’s been the story up until now. Looking ahead, DBS analyst Rachel Miu highlights three key reasons why investors should pay attention to a real opportunity here.
For one, despite the challenges, Nio has been selling more cars than ever, achieving record deliveries in September and throughout Q3. The company has also just launched the L60, the first vehicle from its family-focused brand, ONVO, recording 832 sales in just a few days after its release toward the end of September. Sales are anticipated to “ramp up,” with the company targeting a monthly delivery goal of 5,000 units by the end of Q4. With approximately 150,000 units delivered in the first nine months of 2024 (+36% year-over-year), Miu projects that total sales volume for FY24 will reach 224,000 units (+40% y/y). This implies an average of 25,000 monthly sales in the fourth quarter.
Secondly, Nio is also in a “better financial position” following a recent strategic investment, having received a Rmb3.3 billion cash infusion from a group of Chinese investors. “Given the company is developing new products and markets, the new money will strengthen its existing cash coffer (net cash of c.Rmb24.3bn as of end-Jun 2024) to finance its medium-term development,” Miu opined.
Thirdly, Nio is extending its global reach. Earlier this month, the company announced collaborations with CYVN Holdings (a strategic investor) to enhance its presence in the Middle East and North Africa. The plans include establishing an R&D center in Abu Dhabi and expanding sales points across the region through a joint venture (JV). “This should broaden NIO’s overseas reach and mitigate the export tariff impact (currently only a tiny portion of its business in Europe),” Miu went on to say.
Bottom line, Miu rates NIO shares a Buy, while raising her price target from $7.3 to $8, implying the stock will appreciate by 53% over the next year. (To watch Miu’s track record, click here)
That’s one of the Street’s more bullish takes; Overall, according to the analyst consensus, this stock is a Moderate Buy, a rating based on 8 Buys, 4 Holds and 1 Sell. The forecast calls for one-year returns of ~21%, given the average target clocks in at $6.31. (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.