Barclays analyst Jiong Shao raised the price target on Nio following the company’s third-quarter earnings report, though the investment bank still projects more than 26% downside for the Chinese electric vehicle maker.
The firm — which had turned bearish on the stock last June — increased its target to $4.00 from $3.00 while maintaining its Underweight rating on the stock.
As of press time, Nio‘s U.S.-listed shares were trading 2.30% higher at $5.59.
Improved Margins Offset by Higher Spending
The company’s third-quarter results showed better vehicle gross margins but elevated sales and marketing expenses, Shao told investors in a research note.
Barclays noted that Nio‘s fourth-quarter delivery guidance came in below market expectations.
The EV maker trimmed its fourth-quarter delivery forecast to between 120,000 and 125,000 units from its previous target of 150,000 vehicles when reporting results earlier this week.
Management attributed the reduction to the cancellation of trade-in subsidies in certain cities, signaling an increasingly uncertain demand outlook.
Despite the lower volume guidance, management reiterated its goal to reach break-even on a non-GAAP basis in the fourth quarter as economies of scale take effect and expenses taper.
CEO Warns of Continued Market Weakness
Chief Executive Officer William Li said November “will still be tough” with December remaining “uncertain” during a Q&A session with local media outlets, citing an industry-wide demand slump triggered by subsidy cuts.
The Shanghai-based automaker is set to report November delivery figures on Monday. October deliveries stood at above 40,000 units for the first time and represented the third consecutive record month.
Barclays Previously Cut Target in June
Barclays last adjusted its price target in June following Nio‘s first-quarter results, cutting it to $3.00 from $4.00 on June 4 when the stock closed at $3.53.
At that time, Nio management said it planned to reach 50,000 monthly sales by the fourth quarter.
Barclays called the target “challenging,” with Shao writing that “the 50k monthly units target by year-end appears challenging, especially amid intensifying competition in China.”
Morningstar maintained its $5.30 price target for Nio on Thursday, saying the company’s shares are “fairly valued” after rising more than 50% over the past six months.
