NIO (NYSE: NIO) Upgraded by JP Morgan To $40 per Share as the Bank Conceded That It “Missed the Stock’s Major Rally YTD”

Oct 14, 2020 05:57 EDT
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NIO (NYSE:NIO) shares are up nearly 10 percent in today’s pre-market trading session amid reports that JP Morgan (NYSE:JPM) has significantly upgraded the rising EV star’s target stock price.

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As per the details, JP Morgan analyst, Nick Lai, has set a new June 2021 price target of $40 for NIO shares, constituting an upside potential of over 69 percent relative to the current pre-market price level of $23.65. JP Morgan based this price target on a 3.0x Enterprise Value (EV)-to-Sales estimate for the year 2025. More importantly, NIO is currently cheaper than Tesla shares which trade at 5.1x the EV-to-Sales estimate for 2025. Moreover, in a stark admission, Lai admitted:

"We missed the stock's major rally YTD."

Crucially, the Wall Street behemoth now expects NIO to capture 7 percent of the cumulative EV market by 2025. At a more granular level, JP Morgan predicts that NIO will capture a whopping 30 percent of the premium EV segment.

JP Morgan has also identified several near-term catalysts for NIO shares. These include the upcoming Q3 2020 earnings, expected to be disclosed by mid-November. The bank expects the Chinese EV player to expand its Gross Profit Margin (GPM) by 12 percent in the pertinent quarter. Additionally, a strong backlog of orders is also expected to continue acting as a tailwind for the stock. As an illustration of the strong product demand, the wait time for the newly launched EC6 crossover is currently 8 weeks. Finally, the Wall Street giant expects NIO to debut a new sedan at the NIO Day, currently scheduled for December 2020. This will expand NIO’s product portfolio, currently consisting of the ES6 and ES8 SUVs as well as the EC6 crossover.

We reported earlier this week that, during an interview with a Chinese TV channel, NIO’s CEO Li Bin revealed that the company is leveraging its ongoing partnership with JAC Motors to increase the EV production capacity to 150,000 units in 2021. Crucially, however, the CEO also indicated that the company is planning to double this annual target run rate to 300,000 units, corresponding to a monthly production capacity of 25,000 units! The CEO went on to indicate that this enhanced production capacity will come online by the end of 2021.

Of course, as we have noted in our previous post, NIO seems to be on a tear ever since Tesla (NASDAQ:TSLA) concluded its much-anticipated Battery Day event. For instance, during the Beijing International Automotive Exhibition 2020 held in late September, NIO unveiled the OS version 2.7.0 of its Navigate on Pilot (NOP) feature. This is an Advanced Driver-Assistance System (ADAS) that provides route optimization service along with lane change recommendations by leveraging 23 sensor devices and high-precision mapping to provide location accuracy of up to 20cm. Moreover, at the event held within the purview of the exhibition, NIO also announced a new "Destination Rapid Charging Service” – dubbed the Power Up Plan.

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