Morgan Stanley Analysts Upgrade NIO on Future Growth and Reduced Funding Risk

Javier Frausto

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.

Disclosure: At the time of publication, we have no positions in any of the securities mentioned in this article. We wrote this article ourselves, and it expresses our own opinions. We are not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.

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Comments (7)
No. 1-3
kperkins2
kperkins2

Tesla is gaining traction FAST, we'll see if they can be a legit competitor!

kdriscoll
kdriscoll

Editor

Can they catch TSLA?

JavierFrausto
JavierFrausto

Nio! The EV company that hopes to seriously challenge TSLA in the foreseeable future 👀