Nio Upgraded by J.P. Morgan on Strength of China's EV Market

J.P. Morgan analyst Nick Lai upgraded Chinese electric-vehicle maker Nio to overweight with a Wall-Street-high price target of $40.

Nio  (NIO) - Get NIO Inc. Sponsored ADR Class A Report shares jumped Wednesday after J.P. Morgan analyst Nick Lai upgraded the Chinese electric-vehicle maker to overweight from neutral and nearly tripled his share-price target to a Wall-Street-high $40 from $14.

Market penetration for new energy vehicles in China should explode to 20% by 2025 from less than 5% in 2019, he wrote in a commentary, according to Bloomberg.

Nio shares recently traded at $23.98, up 11%. They have more than quintupled year to date amid investor enthusiasm for electric vehicle stocks.

Production costs for electric vehicles will likely reach parity with internal-combustion-engine vehicles by 2022-2023, as battery costs continue to fall, Lai said.

Tesla  (TSLA) - Get Tesla Inc Report is a factor, too, he said. It’s “driving a rising-tide-lifts-all-boats phenomenon.”

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In August, Nio received at least two boosts from Wall Street analysts. Morgan Stanley analyst Tim Hsiao raised his price target to $20.50 from $12, and UBS analyst Paul Gong raised his rating to neutral from sell and boosted his share-price target to $16.30 from $1.

In a note to clients, Hsiao said Nio's recent $1.4 billion funding injection from the Hefei government "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."

He said, "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."

TheStreet's Bret Kenwell previewed how to trade Nio shares at the end of September.