Can Nio shares deliver on the 2020 promise?

Shares in Nio had a spectacular 2020 – but can the stock keep on rallying in 2021?

Citigroup doesn’t think so. It’s cut the stock to ‘neutral’ warning that it may be the big threat to Tesla that many think the Shanghai-EV company is thought to be.

At the weekend Nio unveiled a new luxury saloon (sedan) called the ET7 and larger volume battery pack. Shares leapt as much as 14% on Monday and the market cap of the company now stands at over $100bn. But Citigroup cautioned the vehicle is “good but not enough to make any critical changes from Tesla’s challenge”. However, despite the downgrade Citi analysts did raise their price target to $68.30 from a previous forecast of $46.40.

The ET7 was unveiled on Saturday at the annual ‘Nio Day’ event in Chengdu. Prices will start at $69k excluding any subsidies and marks the company’s clearest threat yet to the Tesla Model 3. However, it was the new more powerful 150kwh battery pack that will give Nio vehicles a claimed range of 625 miles that Wedbush analyst Dan Ives said was the ‘star of the show’. This prompted Bank of America and Deutsche Bank to raise their price targets on the stock to $70, while JPMorgan upped theirs to a street-high $75.

Despite this, Citi remains downbeat on the ET7, arguing that the new model will have sales of no more than 4,000 a month. Progress will also be stymied by future updates to the Model S Tesla. Citi analyst Jeff Chung lowered his 2021 shipment forecast to 82,000 from 92,000, while the 2022 forecast was cut from 162,000 to 144,000.

Competition in the EV space is clearly heating up. Whilst analysts are unsure about Nio’s ability to test Tesla, there are signs in Europe that ought to worry Elon Musk fans. Tesla’s Model 3 was the fourth-best selling pure EV in Europe in November, with Renault, VW and Hyundai outstripping the company for sales in the continent. November say a 198% rise in hybrid and pure EV registrations vs a 14% decline overall for new car registrations. But while the market is expanding, local OEMs are holding the line against Tesla despite all the hype.

Nio shares in New York trade about +3% higher around $63.50 after the first half hour of the US session on Wednesday.

Nio sentiment analysis