Nio soars to record high after UBS boosts its price target by 1530%, upgrades stock

FILE PHOTO: NIO ES8 electric SUVs are seen displayed at the second media day for the Shanghai auto show in Shanghai, China April 17, 2019.  REUTERS/Aly Song

FILE PHOTO: NIO ES8 electric SUVs are seen displayed at the second media day for the Shanghai auto show in Shanghai, China April 17, 2019.  REUTERS/Aly SongReuters

  • Nio surged 15% to record highs on Tuesday after the China-based electric vehicle manufacturer was upgraded from “sell” to “neutral” by UBS.
  • In a note published on Tuesday, UBS said improving fundamentals driven by operational cost cutting justified its price target boost from $1.00 to $16.30, representing an increase of 1,530%.
  • Still, UBS said it believes all the good news is likely priced in the stock already, as Nio shares hit an intraday high of $17.32 in Tuesday trades, representing 6% potential downside to UBS’s price target.
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Nio is starting to turn skeptics into believers, at least according to a UBS note published on Tuesday.

The firm upgraded the China-based electric vehicle manufacturer from “sell” to “neutral,” and bumped its price target from to $16.30 to $1.00, representing a jump of 1,530%.

UBS said improving fundamentals at Nio have alleviated concerns around its balance sheet thanks to a successful capital raise in June. UBS did warn, however, that Nio will likely need to raise more cash from investors to help fund its rapid growth in the EV space.

Nio is benefiting from a recovery in 2020 sales volume, as there continues to be a strong appetite for electric vehicles from consumers around the world, according to the note. “With the refresh of the ES8 and warming of EV purchases, demand seems strong by its own scale,” UBS said.

UBS primarily boosted its price target so substantially because operational improvements and cost reductions at Nio were well ahead of its previous expectations.

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Still, despite the improved backdrop for shares of Nio, UBS thinks shares may be fairly valued. Its price target of $16.30 represents 6% downside potential from Tuesday’s intraday high of $17.32.

Going forward, UBS said a wide range of outcomes for Nio’s future are possible due to elevated valuations, limited visibility on growth, execution, and competition.

Shares of Nio have surged 609% since their March 18 low of $2.11 as of Monday’s close, and are up 272% year-to-date.

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