What happened
Shares of Chinese electric-vehicle maker NIO (NIO +5.50%) were moving higher on Tuesday, after a successful secondary offering and bullish notes from two Wall Street analysts.
As of 11:15 a.m. EST, NIO's American depositary shares were up about 5.1% from Monday's closing price.
So what
NIO said on Monday that its planned stock offering had priced at $39 -- about 7% below Friday's closing price -- but that it was oversubscribed, meaning that the investment banks running the offering had asked for more shares than the company had originally planned to sell.
NIO's shares fell yesterday on that news, but on balance it wasn't bad news. It shows that there's still plenty of investor interest in NIO's stock at what was really just a minor discount from recent prices.
NIO's flagship ES8 got an overhaul earlier this year that increased its range and added new technologies. Sales of the revamped model have been good. Image source: NIO.
I think NIO's shares are trading higher today because auto investors are seeing that bigger picture. Two bullish notes from Wall Street analysts aren't hurting.
First, Daiwa analyst Kelvin Lau initiated coverage of NIO on Monday with a buy rating and a price target of $59. Lau thinks NIO is the "distinguished" pick among the emerging set of upscale electric-vehicle makers in China, and he sees the company getting to adjusted profitability in 2023 with sales of about 140,000 vehicles. (For comparison, NIO is on track to sell roughly 43,000 vehicles in 2020, up from 20,565 in 2019.)
Now what
Deutsche Bank analyst Edison Yu also had positive things to say about NIO yesterday. In a note initiating coverage of NIO rival XPeng, he reiterated his thesis that NIO is among a group of four emerging Chinese electric-vehicle makers that -- along with Tesla -- appear "increasingly destined to conquer" China's huge new-vehicle market.
Yu had said in September that he thinks NIO is the leader of the group, and that it could become China's next "iconic auto brand." (Yu rated XPeng a buy with a $58 price target, by the way. He thinks there's ample room for several companies to become "winners" in China's electric-vehicle market.)
For what it's worth, I tend to agree with both analysts: There will be multiple winners in China's EV market, but right now NIO looks like the leader among the domestic challengers to Tesla in the premium segments. The added funds from this stock offering (about $2.7 billion, give or take) will make the company look like an even stronger bet.
