Nio Stock Downgraded at Goldman Sachs

Goldman Sachs analyst Fei Fang cut his rating on Nio shares, citing valuation, three weeks after he upgraded them. He still likes its fundamentals.

Nio  (NIO) - Get Report shares on Wednesday fell after Goldman Sachs cut its rating on the Chinese electric-vehicle maker to neutral from buy, though the firm raised its share-price target to $7 from $6.40.

Goldman Sachs analyst Fei Fang still likes the company but acted on its valuation, he said in a commentary. He had raised his rating on Nio to buy from neutral just three weeks ago.

The stock had surged 54% since Fang’s June 3 upgrade, compared with a 5.5% gain for the iShares MSCI China ETF  (MCHI) - Get Report and a 14% rally for competitor Tesla  (TSLA) - Get Report.

As for Nio’s positives, “luxury-car penetration in China is accelerating year-to-date amid covid-19, ahead of our previous expectations,” Fang said.

And Nio’s $475 million share offering, 77% more than expected, gives a great boost to its liquidity. In addition, the company has “economically constrained competitors,” he said.

Nio earlier this month reported that vehicle deliveries tripled in May from a year earlier, setting a record for any month in its history.

Nio delivered 3,436 vehicles in the month. The deliveries consisted of 2,685 ES6s, the company’s five-seat SUV, and 751 ES8s, Nio's seven-seat SUV and its six-seat variant.

In June 2019, the Shanghai company recalled almost 5,000 ES8 electric SUVs after multiple reports of battery fires during the previous few months in China. Also last June, NIO began its first deliveries of the ES6.

Nio American depositary receipts recently traded at $6.75, down 6.6%. The stock closed at a 15-month high of $7.43 on Monday.