NIO (NYSE: NIO) has continued its bullish path throughout 2020, with the stock gaining an eye watering 2008.97% YTD. NIO’s bullish investor sentiment this year has outweighed majority of its smaller competitors. The “Tesla of China” is driving significant growth in the EV industry, particularly in the Asia Pacific region which has intrigued investors in the US. This article will breakdown what analysts are saying about NIO moving into 2021.
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What are Analysts saying about NIO stock?
Firstly, analyst consensus across the board is bullish on NIO stock. The 12 month price targets from 17 analysts from CNN show a median price at $155.80. This suggests an upside potential of 409% based on median pricing. The upper quartile from the pool of NIO analysts suggests a 12 month price of $269.54 whilst the lower quartile of prices NIO at $44.12. Assuming NIO can continue to excel in deliveries, analysts are confident the stock will break triple digits in 12 months.
Now based upon CNN data we can conclude these price targets are extremely bullish. To bring these targets back down to earth, we will dig deeper into what institutions are pricing the company. JP Morgan recently upgraded their price target to $40 and Credit Suisse has upgraded their target to $25 from $12.50. HSBC recently placed a hold rating at $30 a share which has left some investors confused, as the stock soared past $30 in the past week.
According to WSJ data, the consensus amongst analysts suggests the stock is overweight. An overweight rating from analysts suggests the stock is likely to grow in the future. This is promising for long term shareholders, especially with such aggressive 12 month forecasts by analyst. In recent months Morgan Stanley and JP Morgan have upgraded their their NIO rating from neutral to overweight.
Morgan Stanley analyst Tim Hsiao on NIO stock
Tim Hsiao has made his name well known amongst the NIO investor community, with his bullish views on the Chinese EV innovator. Tim Hsiao explains the margin on vehicles is likely to increase significantly in the coming years as NIO improves its scale and supply chain management through injections from its working capital.
“Stock performance, funding access and industry franchise together create self-reinforcing momentum and make NIO an even stronger player to grow its operations and investment value. Despite performing more like a trading stock nowadays with significant volatility, it’s also a growth stock with long-term value unfolding amid recent operational progress,”
NIO operations and its increasing demand
Comparing this with other EV companies forecasts such as Workhorse, Hyliion, NKLA and Lordstown – it is clear analysts are favouring what NIO can bring to the EV industry. However its important to note NIO are expected to deliver 11,000 -11,500 EV vechiles this quarter. This high demand is separating them from its American EV counterparts besides Tesla.
Revenue forecasts for NIO reign supreme
Firstly, the average revenue forecast by 14 analysts suggests 2021 revenue to increase by 95% from 2.24 Billion to 4.02 Billion. This revenue growth is set on a 79% increase in sales growth year on year according to Yahoo finance data. Secondly, vehicle sales in the most recent Q2 earnings were recorded at $493.4 million which was a 146% increase from Q2 2019. Lastly, revenues are expected to be on par come the Q2 earnings call on the 17th of November with a guidance of $572.9-$596.2 million, a 10% increase quarter on quarter.
What are the bears saying about NIO stock?
However with such strong revenue performance the company still ran a $166.5 million net loss incurred from high operational costs. This is a common theme amongst EV manufacturers. The general consensus amongst bears suggest the analysts price targets are overpriced. The institutional price targets are improving, however do not share the same optimism as the targets from the CNN data.
The impact of the election outcome and the increasing COVID-19 cases in the US may effect the stock price moving into 2021. We have seen the power of institutions such as JP Morgan and Morgan Stanley impact NIO’s stock sentiment. Therefore, any negative downgrade even from overweight to neutral could see NIO sell off 5%-10% weight.
In conclusion, the analysts are definitely showing signs of bullish optimism for the next “Tesla of China”. The revenue and delivery forecasts for the upcoming Q3 earnings should provide long term investors incentive (opinion not advice). However, the economic conditions remain uncertain which may effect the investor sentiment moving into 2021. Its important the average buy in price meets your risk management strategy, and with great uncertainty pending entry points under the institutional targets will be imminent (Opinion not advice).
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.