Electric vehicle (EV) makers may be having a tough time weathering a recent slowdown in customer demand, but one Wall Street analyst still thinks investors can make good profits owning stock in at least one growing company.
Shares of Chinese EV company Nio (NIO 2.56%) could more than double from recent levels, according to a note Morgan Stanley put out earlier this week. Analyst Tim Hsiao reiterated an "overweight" rating on the shares citing an expected stock price of $10 per share. That would amount to a 124% upside over the next 12 months or so from its current price.
Growing in a competitive market
Hsiao and his team noted relative strength in the company's sales in March versus the prior month as well as year over year. The breadth of Nio's sales was particularly noteworthy in March. Sales of its SUV models grew more than 40% month over month while its smart electric sedan sales increased by over 50%. Sales came within expectations that were recently adjusted lower by the company.
2024 models have also begun to ship, which the company says have improved "computing power and product competitiveness." In addition to sales momentum from new models, Morgan Stanley analysts also noted Nio has recently enhanced its Battery as a Service (BaaS) program which could help stimulate sales.
The Chinese EV market is highly competitive, and Nio promotes its BaaS program as a differentiator. With that program, customers save money upfront on the vehicle's cost and are charged for quick battery replacements at swap stations throughout China.
However, investors still need to realize that broader economic conditions will continue to impact sales. Even Morgan Stanley had reduced its price target for Nio last month to its current $10 per share estimate. Investors will likely need to be patient and wait for a broader economic boon in China for the stock to hit Morgan Stanley's share price expectation.
