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Why NIO Stock Is Up Today

By John Rosevear – Updated Jun 3, 2020 at 11:48AM

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The stock is on a roll after a key upgrade.

What happened

Shares of Chinese electric-vehicle maker NIO (NIO -0.11%) were trading higher again on Wednesday following an upgrade from a Goldman Sachs analyst.

As of 11:30 a.m. EDT, NIO's American depositary shares were up about 10.7% from Tuesday's closing price and up nearly 25% since the company's earnings report on May 28.

So what

In a note released late on Tuesday, Goldman Sachs analyst Fei Fang raised his rating on NIO's shares from neutral to buy with a price target of $6.40.

A blue NIO ES8, an upscale three-row electric SUV.

NIO's three-row ES8 was overhauled for 2020. Sales have been growing. Image source: NIO, Inc.

Fang pointed out that NIO's cash burn in the first quarter was about 1.6 billion Chinese yuan ($221 million), a big improvement from its 3.6 billion yuan burn in the second quarter of 2019, when the company had to deal with a costly battery recall. He feels that the lower burn rate, coupled with a recent cash infusion from economic-development authorities in China's Anhui province, has addressed the "liquidity risks" that have held back the stock.

Fang also noted that despite the pandemic, NIO's deliveries are up 37% year to date through April, suggesting that consumer recognition of NIO's brand is growing -- and that with thousands of vehicles in service, NIO's sales are now "reputation-driven" rather than "promotion-driven."

Now what

NIO said last week that auto investors should expect its deliveries and revenue to more than double in the second quarter from a year ago and from the first quarter of 2020. Following the company's earnings report on May 28, CEO William Bin Li told Bloomberg that he is confident that NIO has "secured sufficient funding for the company's development."

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Nio Inc. Stock Quote
Nio Inc.
$17.62 (-0.11%) $0.02
The Goldman Sachs Group, Inc. Stock Quote
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