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Why NIO Stock Is Rising Today

By John Rosevear – Updated May 27, 2020 at 3:35PM

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An analyst upgrade ahead of earnings is giving shares a boost.

What happened

Shares of Chinese electric-vehicle maker NIO (NIO -5.43%) were trading higher amid a broad-based rally on Wednesday afternoon, after a JPMorgan analyst upgraded the stock ahead of Thursday's earnings report.

As of 3:15 p.m. EDT, NIO's American depositary shares were up about 8.3% from Tuesday's closing price.

So what

In a note on Wednesday morning, JPMorgan analyst Nick Lai raised his rating on NIO to neutral, from underweight, and boosted his price target for the shares to $3.50 from $2. (We should note that NIO's shares were trading a bit above $4 at mid-afternoon on Wednesday.) 

A red NIO ES6, an upscale five-passenger electric SUV.

Demand for NIO's upscale electric vehicles appears to be strong as China emerges from the COVID-19 pandemic. Image source: NIO.

As Lai sees it, a recent infusion of funds from economic-development authorities in China's Anhui province and the rising popularity of Tesla's (TSLA -6.32%) Model 3 in China could lead to "an emerging structural wave" of corporate and individual customers for electric vehicles from established domestic Chinese makers, including NIO.

There have been signs that demand for NIO's vehicles is strong as China emerges from the coronavirus pandemic. China Daily reported over the weekend that a 40-minute livestream featuring NIO CEO William Bin Li last week led to 320 vehicle orders -- representing about $21 million in sales -- and over 5,000 test-drive appointments. 

Now what

Auto investors still have plenty of questions for NIO, starting with the unusual structure of its deal with Anhui's economic-development authorities. But I expect we won't have to wait much longer for answers: NIO will report its first-quarter earnings results before the market opens tomorrow. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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