Electric vehicle company Nio can rally 50%, says HSBC as it upgrades the stock

Published Fri, Jul 9 20211:50 PM EDT

Chinese automaker Nio stands to benefit from strong electric vehicle demand growth, which should push the stock higher, HSBC said Friday as it upgraded the company to a buy rating. "We expect Nio's volume growth momentum to pick up on strong EV demand and the competitive premium EV proposition and established brand traction," the firm said. Based on expectations of higher revenue growth, the firm also raised its price target on U.S.-listed shares to $69, which is about 51% above where the stock closed on Thursday. HSBC's prior target was $54. Nio said earlier in July that it delivered a record 8,083 vehicles in June , bringing its total for the second quarter to 21,896. The company had forecast deliveries between 21,000 and 22,000 for the period. June's number follows a decline in May as the global chip shortage hurt Nio's business. For 2021, Nio has delivered more than 41,900 cars, which is almost as high as 2020's total of 43,728. HSBC said that Nio's established place in the electric vehicle market gives it a first-mover advantage as vehicle sales expand. "We see Nio's strong brand traction, solid product offering and solid reputation among existing car owners to likely drive its continuing volume growth," analysts led by Yuqian Ding wrote in a note to clients. "With existing SUV models and the to-be-introduced sedan series and its in-house autonomous driving software, we see Nio likely establishing itself in the premium EV segment." Underlying HSBC's bullish call on Nio is the firm's belief that electric vehicle sales across China will continue to rise. Ding noted that through May NEV sales, or new energy vehicles as they're called in China, rose 236% year over year compared to 38% year-over-year growth in the overall auto market. "Generation Z, in our view, is likely the most tangible car buyer group for the coming decade and they are more electric vehicle friendly," he said. HSBC lifted its 2025 and 2030 electric vehicle penetration estimates to 22% and 45%, up from 19% and 39%, respectively. Under its bull case scenario, the firm envisions EVs encompassing 71% of the market by 2030. HSBC also holds buy ratings on Contemporary Amperex Technology Co Ltd and BYD . Shares of Nio were down slightly during afternoon trading on Wall Street. For the year they're down 6%, but up nearly 213% over the last year. - CNBC's Michael Bloom contributed reporting.

Nio plans to begin deliveries of its ET7 electric sedan in 2022.

Evelyn Cheng | CNBC

Chinese automaker Nio stands to benefit from strong electric vehicle demand growth, which should push the stock higher, HSBC said Friday as it upgraded the company to a buy rating.