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Wall Street is lowering price targets on NIO shares after the company’s first-quarter earnings report.
Hector Retamal/AFP via Getty Images
Wall Street is cutting price targets on shares of
NIO
as the Chinese electric-vehicle maker cuts prices for its vehicles. Both items are potentially bad news for investors. Still, the stock was rising early Monday after a wild day of trading Friday following the release of first-quarter earnings.
To start the week, U.S.-listed
NIO
(ticker: NIO) stock was up 4.4% in premarket trading at $8.06 a share.
S&P 500
and
Nasdaq Composite
futures were up 0.1% and 0.2%, respectively. The move Monday follows volatile trading on Friday when NIO stock fell in premarket trading, opened up almost 1%, traded as high as $8.75, or up 12.3%, and then closed down 0.8% at $7.73.
Investors didn’t seem to know what to make of the first-quarter results. Sales and earnings were roughly in line with Wall Street estimates. What’s more, the company said it expects to deliver more than 10,000 vehicles in June, up from 6,658 and 6,155 delivered in April and May, respectively.
Rising deliveries, however, weren’t enough for Citi analyst Jeff Chung to maintain his NIO stock price target. He took it to $11.50 from $13.40.
Along with his target, Chung lowered his profit margin forecasts “to factor in the sector’s enormous pricing/margin pressure,” noting that over the weekend NIO cut prices on entry-level trims for all its vehicles.
Cuts amounted to about $4,500, or almost 10% of some vehicles’ starting prices. While vehicle price cuts could provide a short-term sales boost, Chung wrote any boost is “potentially unsustainable” given the price competition in the overall EV segment of the Chinese car market.
Price targets were lowered at several other brokers too. The most significant cuts came with a pair of downgrades of NIO stock following the company’s earnings report to Hold from Buy. Nomura cut its price target to $7.50 from almost $26 a share. CMB cut its price target to $8.50 from $21.
Overall, the average analyst price target is now at about $11 a share, down a couple of dollars since earnings were reported.
Despite cuts and downgrades, NIO stock remains relatively popular with analysts. About 67% of analysts covering the company rate shares a Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 53%.
Analyst support hasn’t really helped investors lately. Coming into Monday trading, NIO shares have declined about 57% over the past 12 months. Price competition as well as rising interest rates and a slowing economy have sapped some investor enthusiasm for NIO shares.
Tesla
(TSLA), one of the largest EV sellers in China, cut prices aggressively around the world in early 2023. Other EV makers have followed.
Write to Al Root at [email protected]
Source: https://www.barrons.com/articles/nio-stock-price-targets-e4891c25?siteid=yhoof2&yptr=yahoo