Morgan Stanley Analysts Upgrade NIO on Future Growth and Reduced Funding Risk
On Wednesday before the opening bell, Analysts at Morgan Stanley upgraded NIO Inc. from Equal-weight to Overweight, raising the Target Price to $20.50 from $12.00.
This was due to the recent Hefei deal that relieves NIO of funding risk and allows NIO’s profitability and cash flow to potentially advance. Alongside this, Battery-as-a-Service (BaaS) will also upgrade its opportunity to reinstate NIO’s position in the EV ecosystem yet again by defining industry standards.
NIO is a Chinese premium choice in the electric vehicle market. As told in NIO’s Investor relations page, “We design, jointly manufacture, and sell smart and connected premium electric vehicles, driving innovations in next generation technologies in connectivity, autonomous driving and artificial intelligence. Redefining user experience, we provide users with comprehensive, convenient and innovative charging solutions and other user-centric service offerings.” Their goal of smart electric cars is for a more sustainable future for the planet.
Hefei government's funding into NIO and its improving credit access makes NIO considerably more financially competitive against it’s EV peers. This news should drive value into NIO and allow it to be a domestic luxury EV brand, with great brand loyalty.
Huge improvements in margin use and cash flow is also favorable. And enhanced working capital will allow efficient use of the supply chain management. Since NIO beat it’s 2Q vehicle margin forecast, the new total vehicle margin estimate for 2022 is 23%.
As stated by Morgan Stanley analysts in the report this morning, “Battery-as-a-Service acts not only as a long-term volume driver but, more importantly, enables NIO to define industry standards and gain the upper hand in China’s EV ecosystem”
There has been speculation in the announcement of the BaaS act, the official announcement just solidified the information. A different and innovative auto financing option will make NIO’s vehicles the desired pick while still being commercially available in the market.
NIO is trading over 16% higher at the time of publication.
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