Shares of electric-vehicle maker NIO are down 25% since the end of March.
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Chinese Covid-19 lockdowns have hurt electric-vehicle sales and production since late March, putting pressure on share prices. There is light at the end of the tunnel though.
Mizuho analyst Vijay Rakesh recently hosted NIO (ticker: NIO) at a brokerage event. He noted that supply-chain delays are improving and that production should be back to preshutdown levels by June. That is a welcome bit of information for weary EV investors.
EV stocks have taken a beating since Chinese Covid-19 inflections accelerated in March. Shares of NIO are down 25% since the end of March. Stock in peers XPeng (XPEV) and Li Auto (LI) are down 20% and 12% over the same span, respectively. Tesla (TSLA) shares are down about 39%.
There are other factors driving share prices, such as inflation and, in the case of Tesla, CEO Elon Musk’s potential purchase of Twitter (TWTR). But Covid lockdowns in China have been a big issue too.
This past Thursday, Wedbush analyst Dan Ives cut his Tesla price target to $1,000 from $1,400 citing Chinese headwinds. Estimates for Tesla deliveries have slid to about 275,000 units from late February peak of about 350,000 units. That is all due to production shutdown and delays at the company’s Shanghai plant. And estimates for NIO’s second-quarter sales have gone to about $1.7 billion from a late February peak of more than $2.1 billion.
“NIO could see its production back to pre-shutdown levels potentially in early June, as May production is already better week by week with Shanghai reopening,” wrote Rakesh in a Sunday report. He sees NIO’s plant ramping up to 240,000 cars a year by the third quarter. NIO has delivered about 95,000 units over the past 12 months. “NIO is qualifying multiple suppliers for key componentsto avoid potential future impact of supply tightness,” added the analyst.
In addition to the production news, Rakesh also noted that the company is making progress on its advanced driver assistance software, European expansion plans and battery costs. NIO is using more, lower cost, lithium-iron-phosphate battery chemistries in its vehicle. That is a step many EV makers have taken to help battle rising costs.
Rakesh is a NIO bull. He rates share Buy and has a $60 price target for shares. That is roughly 264% above the $16.44 levels shares closed at on Friday. That implied return is high because of how badly shares have been beaten up. Coming into Monday trading, NIO stock is off about 48% year to date and 70% from its July 52-week high of more than $55 a share.
Rising interest rates, inflation, and fears about the delisting of U.S. listed foreign stocks that don’t meet U.S. accounting standards have weighed on NIO shares.
Rakesh isn’t alone in his views. More than 94% of analysts covering NIO stock rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%. The average analyst price target is just about $39, below Rakesh, but up more than 130% from recent levels.
NIO stock is down about 0.7% in early trading Monday. XPeng reported earnings that beat Wall Street estimates, but guidance for the second quarter was a little lower than analysts were projecting. Covid-19 was the reason for the weaker guidance. That might be weighing on NIO shares too.
XPeng stock is down about 0.3% in premarket trading. S&P 500 and Dow Jones Industrial Average futures are both up about 0.9%.
Write to Al Root at [email protected]
