The president of Chinese electric vehicle (EV) maker Nio (NIO -3.35%) spoke at a media event this week, giving investors some news about the company's growth plans. Some of that news had the stock moving higher earlier in the week. But after an analyst price-target cut yesterday, investors are selling today. As of 2:12 p.m. ET, Nio's American depositary shares were trading down 2.6%.
Yesterday, Barron's shared that analyst Soobin Park with Asian investment group CLSA cut her price target on the stock from $60 to $35 but left her rating as a buy. That buy rating would seem to make sense as the new price target still represents a 37% increase above yesterday's closing share price. But after the stock jumped on some company-related news earlier this week, investors seem to be looking at the negative connotation of the analyst price cut.
Barron's surmises that the price cut was more a result of the stock's valuation reset, rather than a prediction of one, based on the new target. That's probably accurate. Shares have dropped more than 20% so far in 2022, but the market cap is still around $40 billion for a company that is only producing about 10,000 vehicles per month. Nio reported revenue of about $1.5 billion in the third quarter but hasn't yet shown a profit.
The company is expecting continued growth, however. Company President Qin Lihong said this week that it will soon announce a third new vehicle to be launched in 2022. The new ES7 SUV is expected to join two new sedans that are already scheduled to begin delivery this year. Qin also said the company will continue investing in its charging and battery swapping station infrastructure until the EV charging experience rivals refueling fossil fuel-powered vehicles in convenience. The stock will likely remain volatile as the company continues to grow into its valuation, which seems to be reflected with today's move.