Nio surges after JPMorgan upgrades China electric vehicle play and says shares can nearly double

Published Wed, Oct 14 202010:34 AM EDTUpdated Wed, Oct 14 20204:05 PM EDT

(This story is for CNBC PRO subscribers only.) Shares of Nio jumped 22.57% on Wednesday after JPMorgan upgraded the company to an overweight rating based on surging demand for electric vehicles in China. The firm also introduced a new June 2021 $40 price target on the stock, which implies an 85% rally from Tuesday's closing price of $21.62. The prior target was $14. With Wednesday's pop Nio has surged more than 500% this year amid broad enthusiasm for the electric vehicle space. JPMorgan acknowledged that it missed out on the company's eye-popping rally, but the frim doesn't believe it's too late to get into the name. Citi also upgraded Nio to a buy rating on Wednesday, based on a strong order backlog as well as the company's growing market share. The firm lifted its target to $33.20 from $18.10. JPMorgan analyst Nick Lai said he evaluated the company based on the firm's bullish top-down sector view, and determined that the stock "remains attractive from a long term perspective." Lai pointed to electric vehicle penetration in China quadrupling by 2025, rising to 20% from less than 5% in 2019. Greater adoption will be driven by a shift in consumer taste, as well as cost-parity between internal combustion engine vehicles and electric vehicles as battery costs continue to decline. According to JPMorgan, Nio is projected to capture 7% of the passenger electric vehicle market by 2025, and roughly 30% of the premium space, which is where the company is focused. Nearer term, Lai said he expects solid third quarter results from Nio in mid-November, as well as a robust backlog for the company's newly launched EC6 crossover model. In September Nio delivered 4,708 vehicles, a 133.2% year-over-year increase, bringing the company's total 2020 deliveries to 26,375, for a 133.7% year-over-year rise. Electric vehicle companies have been a hot trade this year on the back of Tesla's nearly 450% rally, and some believe the space now looks crowded. But Lai said that it's not a winner takes all market. "Tesla ... obviously is driving 'a rising tide lifts all boats' phenomenon which not only leads to a fast growing NEV addressable market but also benefits suppliers relevant to the broader EV supply chain," he said. He compared the electric vehicle market to the smartphone market, noting that Chinese brands such as Huawei and Xiaomi were able to seize market share thanks to their product offering and attractive pricing. - CNBC's Michael Bloom contributed reporting.

Beijing auto show in 2020

Evelyn Cheng | CNBC

(This story is for CNBC PRO subscribers only.)

Shares of Nio jumped 22.57% on Wednesday after JPMorgan upgraded the company to an overweight rating based on surging demand for electric vehicles in China. The firm also introduced a new June 2021 $40 price target on the stock, which implies an 85% rally from Tuesday's closing price of $21.62. The prior target was $14.

With Wednesday's pop Nio has surged more than 500% this year amid broad enthusiasm for the electric vehicle space. JPMorgan acknowledged that it missed out on the company's eye-popping rally, but the frim doesn't believe it's too late to get into the name.

Citi also upgraded Nio to a buy rating on Wednesday, based on a strong order backlog as well as the company's growing market share. The firm lifted its target to $33.20 from $18.10.