The stock market is often noted to be a forward-looking beast and look ahead is exactly what investors should do when considering the case for Nio (NIO), says Morgan Stanley's Tim Hsiao.
"The stock has lagged peers YTD as growth stalled on the component crunch, plant restructuring and no new products," the analyst explained. "However, it's time to turn the page - a superior ecosystem, broadening customer and distinct branding make the setup unique and favorable for NIO to gather strength into 2022."
On November 29, the upcoming ET7 model - set for a release at the end of 1Q22 - successfully rolled off the assembly line. Although doubts linger that the model's market entrance could still be delayed, Hsiao notes the successful pre-production gives NIO a 3-month lead time to "ramp up output and prepare manufacturing necessities." Getting the ET7 to market on time could also calm investors' nerves regarding the launch of the ET5 - scheduled for mid-2022.
However, to truly make a mark in the increasingly competitive EV space, nice vehicles alone will not suffice. A company needs other distinguishing features and here Hsiao counts NIO's "broader range of capabilities" beyond the cars. These include software, services and energy solutions. On top of the next generation ADAS function based on NIO's NT2 platform, over the past year the company has continued to grow its service network. The pace of deployment has accelerated - from around 200 battery swap stations at the end of 2020 to 300 by July and 600 at present.
Other important elements which Hsiao believes Nio stands to benefit from are its robust user ecosystem and its strong brand, with Nio's up there alongside familiar names such as Tesla and BMW, according to the firm's AlphaWise Survey.
"In addition," says the analyst, "According to the development history of the Chinese auto industry and particularly for luxury brands such as Mercedes and BMW, branding could be a key advantage for auto makers to expand their product spectrum, which bodes well for better operational visibility for downward penetration (from a higher price range to a lower one) than premiumization."
With bright prospects ahead, Hsiao gave his price target a little bump - from $64 to $66, suggesting room for an 82% uptick over the next 12 months. To this end, the analyst rates NIO an Overweight (i.e. Buy). (To watch Hsiao's track record, click here)
Looking at the consensus breakdown, most analysts agree. The stock's Strong Buy consensus rating is based on 8 Buys vs. 1 Hold. The average price target is a bullish one; at $60.67, the figure suggests shares will be changing hands for ~68% premium a year from now. (See NIO stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.