Goldman Sachs on Tuesday upgraded its rating on Nio’s U.S.-listed shares to Neutral from Sell, citing expectations that the Chinese electric vehicle maker’s cost reduction initiatives will help narrow losses over the next three years.
“We upgrade Nio (ADR/H share) to Neutral (from Sell) as we believe management’s cost reduction efforts would help improve the company’s profit levels over the next three years by 4%–10% […],” Hou wrote in a note.
The company logged a net loss of 6.75 billion yuan (about $930 million) for the first quarter, widening 30% from a year ago but narrowing 5% from the previous quarter.
Analyst Tina Hou lifted the rating and raised the 12-month price target slightly to $3.80 from $3.70 previously. The target for the Hong Kong-listed shares was increased to HK$29.50 from HK$29.
The new price target implies an upside potential of 8% based on Monday’s closing price of $3.52.
The EV maker said this Tuesday it is adjusting its business model in Denmark, one of its European markets, after signing a distribution agreement with a local partner.
“Our new 12-month DCF-based target prices of US$3.8/HK$29.5 (vs. prior US$3.7/HK$29) imply 8%/7% upside vs. our covered OEM average of 4%,” Hou wrote in a note.
Goldman Sachs had downgraded Nio to Sell in late November 2024, citing widening net losses and cash outflows.
Since then, the stock has have fallen about 25%, underperforming the S&P 500’s 1% gain and a 37% increase in Goldman’s covered new energy vehicle (NEV) peers.
In February, Hou raised her price target to $3.90 from $3.50 while maintaining the Sell rating, implying about 11% downside at the time.
Earlier, in January, she had cut the target by 40 cents to $3.50 amid concerns over the production ramp-up of Nio’s mass-market sub-brand Onvo.
Last week, Nio Group — which includes the Nio, Onvo, and Firefly brands — saw insurance registrations in China rise to 4,730 units, an increase of 9.2% week over week.
The management said at the latest earnings call that it expects the core Nio brand to deliver 25,000 units per month in the final quarter of the year while the Onvo brand is planned to reach another 25,000 monthly units.
Nio expects to double its deliveries this year to about 440,000 units as it has set the fourth quarter as its target to reach profitability.
The company will start to sell its Nio and Firefly brands in over a dozen new markets over the next 18 months including Portugal, Greece, Cyprus, Bulgaria, Austria, Belgium, Hungary, Luxembourg, Poland, Romania and the Czech Republic.
Outside Europe, the company is planning to expand to Singapore and Azerbaijan later this year.
A right-hand drive Firefly EV model was spotted near Melbourne, in Australia, suggesting that Nio’s sub-brand is testing its debut model in the country.
Nio shares are down 20% year to date. The stock reached an all-time high at $66.99 in January 2021 amid a bubble in the electric vehicle industry.
