What happened

Electric vehicle stock Nio (NIO 0.38%) jumped Thursday morning, rallying 7.5% by 11:45 a.m. EDT after a huge analyst upgrade.

So what

Goldman Sachs upgraded its rating on Nio stock to buy with a price target of $56 a share, representing a whopping 66% upside from the stock's Wednesday closing price.

Nio's electric sedan ET7 on display at an auto show in China.

Nio electric sedan ET7 on display. Image source: Nio.

Goldman Sachs sees significant upside in Nio once it begins to deliver its flagship luxury electric sedan, the ET7, from early 2022 for four broad reasons:

  • ET7 product design: Goldman Sachs compares it with premium sedans from BMW and Daimler's (MBGA.F 0.34%) Mercedes and expects ET7 sales to reach levels similar to those of the BMW 7 series and Mercedes S-class, which sell more than 10,000 units per month in China.
  • ET7 price point: Goldman Sachs believes the ET7 should strengthen Nio's "brand equity in the premium space" given that it is the most expensive model launched yet by a local manufacturer in China.
  • ET7 evolution: Goldman Sachs says the ET7 will put the Nio Autonomous Driving technology on full display, given its features like 33 sensors including high-resolution cameras and lidar.
  • The battery-as-a-service (BaaS) plan: Nio's BaaS service will make the ET7 more price competitive as customers will have the option to buy cars without batteries and instead lease and swap them at power-swap stations.

Goldman Sachs also pointed out Nio's upcoming Nio Day 2021 in Suzhou, China; its entry into Norway, and accelerating BaaS build-out as other factors that should drive the stock higher.

Now what

Nio delivered a record number of vehicles (10,628) in the month of September, beating archrivals XPeng and LiAuto, and its total third-quarter sales doubled year over year to 24,439 vehicles. Also, Nio just announced it now has 517 power-swap stations across China, which allow users to get a fresh battery pack installed in just about five minutes. On Sept. 30, the company also officially entered Europe with deliveries of its SUV, the ES8, in Norway, with the BaaS option.

Given Nio's pace of growth and upcoming models, I second Goldman Sachs' bullish view on the stock and believe it is one of best EV stocks you can buy and hold for the next decade.