© Reuters NIO (NIO) Shares Pop After BofA Upgrade to Buy on ‘Attractive’ Valuation
Shares of Nio (NYSE:) are trading 4% higher today after Bank of America analyst Ming Hsun Lee upgraded to Buy from Neutral with a $26.00 per share price target, up from $25.00.
Improving sales, better margins expected in the second half of the year, and attractive valuations are the 3 key reasons that pushed Lee to upgrade Nio shares to Buy.
“ET7 shipment began in March; ES7 is expected to launch in June and start delivery in Aug (slightly ahead of our previous expectation); ET5 is scheduled to be delivered in Sep; facelifts of ES6, ES8 and EC6 will be available in 2H22. ES8/ES6/EC6 waiting time is 10 weeks and ET7 6 months, showing ample orders on hand,” Lee said in a client note.
On valuation, the analyst notes that NIO is trading at 1.7x 1-year forward EV/sales, which is below its historical average.
“This seems attractive given the improving outlook – NIO traded at a similar valuation only during 2H19-1Q20 when it faced sales slowdown, product recalls and financing challenges, while its current fundamental is stronger in terms of brand equity, sales growth, R&D capability, and improved cash flow. Factoring in the latest model schedule and production recovery pace, we lift 2022/23E sales volume by 3%/8%,” Lee concluded.
By Senad Karaahmetovic