The investment firm also raised its price target on the shares to $68.30 a share from $46.40 after the carmaker unveiled its first sedan model, the ET7, last week.
"Despite the competitive features, we believe ET7 will get about [3,000-4,000] units’ monthly average sales volume in 2022 given intensified competition, particularly in the wake of Tesla’s (TSLA) - Get Report recent price cuts," Citi analyst Jeff Chung said.
The price target represents a price-to-sales multiple of 13.2. NIO shares at last check were down 2.6% at $61.06.
On Monday, shares of NIO jumped after the company unveiled the ET7. It also launched a bigger-volume battery pack that can improve driving range, an upgraded autopilot system, and the second iteration of its battery-swap station, a concept whereby people can change the battery in their vehicle rather than recharge it.
The ET7 starts at 448,000 yuan ($69,193) before government subsidies. Deliveries will start from the first quarter of 2022.
"Here, we turn more conservative on our forecasts and lower our 2021/2022 estimated shipment forecasts to 82,000/144,000 (from 92,000/162,000 units).
"We roll over our valuation to 2022E from average 2021-2022E and lift our target price-to-sales multiple to 13.2 times (current battery electric vehicle [original equipment manufacturer] sector average) to align with the sector valuation amid a strengthening [new energy vehicle] outlook," Chung said.
Last year, Tesla sold more than 120,000 of its bestselling Model 3 sedans in China.
Tesla also started selling its roomier China-made Model Y SUV on Jan. 1, which starts from 339,900 yuan ($52,590).