Morgan Stanley analyst Tim Hsiao also raised his price target to $20.50 from $12.
American depositary receipts of the Shanghai company at last check were 11% higher at $19.73.
In a note to clients, Hsiao said the Hefei government's recent $1.4 billion funding injection "not only removes funding risk but also advances Nio's vehicle profitability and cash flow."
Hsiao said Nio's 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," he said, "it's also a growth stock with long-term value unfolding amid recent operational progress."
Hsiao said Nio's battery-as-a-subscription service offered lower usage cost and "will drive 10% to 36% incremental vehicle sales in 2021 through 2030."
"More importantly, with closer engagement with government and major players via battery-as-a-subscription, Nio can strengthen its position in the electric-vehicle ecosystem by defining industry standards," the analyst said.
Hsiao added that while Nio has been communicating with the market on its BaaS initiative for the past couple of months, "the official announcement still provided critical new pieces of information, such as the detailed monthly plan and unit economics that will be crucial to the long-term sustainability of Nio's BaaS program."
Supported by a well-thought long-term growth strategy and underpinned by more substantial midterm profitability/cash flow improvement with surge in scale, Nio deserves a further valuation rerating, Hsiao said.
On Tuesday, UBS analyst Paul Gong upgraded the company to neutral from sell and boosted his share-price target to $16.30 from $1.