Shares of Chinese electric vehicle (EV) maker Nio (NIO -4.20%) were trading higher on Tuesday morning, after a Wall Street analyst initiated coverage of the company with a strongly bullish note.
As of 11:30 a.m. ET, Nio's American depositary shares were up about 2.3% from Monday's closing price.
In a new note on Tuesday, Barclays analyst Jiong Shao initiated coverage of Nio with an overweight rating and a price target of $34.
Shao wrote that rapid adoption of electric vehicles around the world and "booming" sales have given Nio and its two key Chinese competitors, Xpeng (XPEV -2.81%) and Li Auto (LI -0.80%), a "rare opportunity" to take not only a significant share of China's domestic auto market, but to also establish themselves as major players in other global markets.
Shao believes that electric vehicles and "smart cars" are among China's top national priorities, backed by "one of the most supportive and well-thought-out government policy agendas" in the world.
Shao also initiated coverage of Xpeng and Li Auto at overweight, with price targets of $38 and $45 respectively.
I think Shao is right to say that Nio, its rivals, and their investors have a rare opportunity before them.
But I urge auto investors to keep in mind that the major global automakers are chasing the same markets. Especially outside of China, the major automakers that are moving most aggressively into EVs have significant structural advantages that should allow them to maintain and (perhaps) even increase their shares of the market as the world moves to zero-emission vehicles.
That said, there are definitely big opportunities for Nio and its rivals in markets like Europe and North America. Just don't underestimate the competition that will be there as well.