There’s a new bull for NIO, XPeng, and Li Auto shares.
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The three U.S.-listed Chinese electric-vehicle makers picked up a new bull on Tuesday who calls the setup for the stocks a “rare opportunity.”
Tuesday, Barclays analyst Jiong Shao launched coverage of NIO (ticker: NIO), XPeng (XPEV), and Li Auto (LI) with Buy ratings.
Shao believes rapid adoption of EVs in China, booming sales at the companies and supportive government policies for EV purchase all combine to make the “rare opportunity” referenced in his report.
China is the world’s largest market for new cars, and for EVs. EV penetration of new-car sales in China hit about 15% in 2021, up from 6% in 2020. That number includes plug-in hybrid vehicles. EV penetration in the U.S. is closer to 3% of new-car sales.
Combined unit sales for the three grew roughly 183% in 2021, rising to almost 240,000 cars, up from about 85,000 cars delivered in 2020.
His price target for NIO’s American depositary shares is $34, up about 42% from recent levels. His XPeng ADR price target is $45, up about 22% from recent levels. For Li Auto ADRs, Shao’s target price is $38 a share, up about 33% from recent levels.
The average analyst target prices for NIO, XPeng and Li ADRs are actually much higher at roughly $56, $62, and $45, respectively, but they look a little stale right now. Shao is launching coverage after the ADRs have been badly beaten up.
Coming into Tuesday trading, NIO, XPeng, and Li ADRs are down about 21% year to date on average. Inflation and rising interest rates have hurt shares of fast-growing, richly valued companies more than others.
Fast-growing companies generate most of their earnings and cash flow far in the future. That future cash is worth less when discounted back to today when interest rates are higher.
Combined, NIO, XPeng, and Li sales are expected to grow about 85% in 2022, compared with 2021. That’s why the companies are valued like growth stocks, trading at about 4.5 times estimated 2022 sales on average. The Russell 1000 Growth Index trades for about 4.4 times estimated sales.
With the new Buy ratings, the three stocks are even more popular with analysts. More than 90% of analysts covering NIO, XPeng, and Li ADRs rate them at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%.
NIO ADRs are up about 0.3% in Tuesday morning trading. Li ADRs are off about 0.5%, while XPeng ADRs are down about 0.3%. The S&P 500 is flat. The Dow Jones Industrial Average has added 0.2%.
Write to Al Root at [email protected]
