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Is Nio's Stock a Buy? Another Wall Street Analyst Thinks So.

By John Rosevear – Jan 12, 2022 at 3:08PM

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She's expecting impressive sales growth -- but her expectations may be conservative.

Shares of Chinese electric-vehicle (EV) maker Nio (NIO) were having a good day on Wednesday. As of 2:30 p.m. ET, Nio's American depositary shares were up about 5.1% from Tuesday's closing price, thanks to some upbeat news on pricing and a bullish note from Wall Street.

The pricing news was simple and good: Nio's average transaction price in December was about $69,700, a strong number that was -- according to the company's communications chief, Ma Lin -- second only to Daimler's luxury stalwart, Mercedes-Benz. 

That's good news given that Nio hasn't had a new model since the EC6's launch in the third quarter of 2020, a lifetime in China's fast-moving new-vehicle market. Of particular interest: Nio's ES8, its oldest model (dating all the way back to June 2018), had its best month ever for pricing, averaging about $84,400 in December, Ma said.

It can be challenging for U.S.-based EV investors to absorb the nuances of China's new-vehicle market. But the implications of those pricing numbers are easy to understand: Customers are paying up for a Nio, and that should give the company's margins a boost.

A blue Nio ET7, a sleek electric luxury-sports sedan.

Nio's new-product drought will end in late March, when its new flagship ET7 sedan begins shipping. Two more new Nio models are expected before year-end. Image source: Nio.

Wall Street has been taking notice. In a new note on Wednesday, Macquarie analyst Erica Chen initiated coverage of Nio and its key local rivals, XPeng (XPEV -1.49%) and Li Auto (LI -1.26%), with outperform ratings on all three stocks. She assigned Nio's U.S.-traded shares a price target of $37.70, roughly 20% above current levels.

Noting Nio's market positioning ("affordable luxury") and its emphasis on customer service, and the rapid pace at which Chinese consumers are adopting EVs, Chen wrote that she expects the company's sales to grow roughly 50% annually for the next few years.

That growth rate might be conservative. As Citibank analyst Jeff Chung wrote in a separate note on Tuesday, "new energy vehicles" (including plug-in hybrids and battery-electrics) represented almost 23% of new passenger-vehicle sales in China in December. Overall, sales of new energy vehicles in China rose about 180% in 2021 from 2020. 

Nio's own sales were up about 109% in 2021 versus 2020, but that was with the company selling every car it could crank out amid global supply chain disruptions. How many more could it have sold if it hadn't been scrambling to procure enough chips and other parts to keep its assembly lines going? 

We may find out in 2022. 

Citigroup is an advertising partner of The Ascent, a Motley Fool company. John Rosevear has no position in any of the stocks mentioned. The Motley Fool owns and recommends Nio Inc. The Motley Fool has a disclosure policy.

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