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Morgan Stanley holds NIO shares at overweight on positive factors

EditorNatashya Angelica
Published 05/09/2024, 14:02
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NIO
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On Thursday, Morgan Stanley (NYSE:MS) maintained its Overweight rating on shares of NIO Inc. (NYSE: NIO), a China-based electric vehicle manufacturer, with a price target of $6.10. The firm anticipates that NIO's stock price will experience an increase in the next 15 days, driven by several positive factors.

The upcoming launch of the L60 model on September 20 is highlighted as a significant positive catalyst for the company. The new model has reportedly received favorable feedback, which could contribute to the stock's performance. Moreover, the analyst expects the company's gross profit margin (GpM) for the third quarter to continue its upward trend.

The introduction of a series of new models is also expected to support a sequential increase in sales volumes. This, according to Morgan Stanley, lays a robust foundation for NIO as it heads into the year 2025. The firm estimates a 70% to 80% probability of this positive scenario unfolding, describing it as "very likely." These estimates are based on Morgan Stanley's subjective assessment of how likely the scenario is to occur.

In other recent news, electric vehicle manufacturer NIO Inc. has seen a series of significant developments. The company reported a notable improvement in its vehicle gross profit margin, which rose by 3 percentage points in the second quarter, largely due to lower material costs and increased economies of scale.

NIO also saw a substantial boost in its vehicle sales revenue, which surged by 87% quarter-over-quarter. However, the company's operational expenses grew by 19%, with research and development costs and selling, general, and administrative expenses experiencing increases.

In the wake of these financial results, Citi has maintained a Buy rating on NIO shares, albeit with a lowered price target of $7.00. This adjustment reflects changes in valuation multiples and anticipated improvements in NIO's gross profit margin. Morgan Stanley also reaffirmed its Overweight rating on NIO, aligning with the company's guidance for third-quarter volumes.

In other company news, NIO's Chief Financial Officer, Steven Wei Feng, has stepped down, with Stanley Yu Qu taking over the role. This transition is not expected to impact the company's operations or potential future capital raising activities.

Moreover, NIO and other Chinese automakers are contemplating price adjustments due to new tariffs imposed by the European Union on Chinese-made electric vehicles. Despite this, NIO remains committed to exporting to Europe. These are recent developments and are part of the dynamic landscape of the electric vehicle industry.

InvestingPro Insights

As Morgan Stanley maintains an optimistic outlook on NIO Inc., real-time data and InvestingPro Tips provide additional context for investors. NIO holds a significant position in the Automobiles industry and despite being a prominent player, it faces challenges with its financials.

The company has more cash than debt on its balance sheet, which is a positive sign for liquidity and financial health. However, analysts are not expecting the company to turn a profit this year, and the company's cash burn rate is a point of concern. NIO's stock price movements have been quite volatile, with a notable return of 7.61% over the last week, yet it has fallen significantly over the past year and three months.

From a valuation standpoint, the company's market capitalization stands at $8.77 billion, with a negative Price to Earnings (P/E) ratio of -2.81, indicating that the company is not currently profitable. The Price to Book (P/B) ratio of 3.03 suggests that the market values the company at three times its book value. While NIO has experienced a revenue growth of 9.62% over the last twelve months, its gross profit margin remains low at 6.16%, reflecting the challenges in maintaining profitability.

Investors can find more InvestingPro Tips for NIO, which cover various aspects such as earnings revisions, stock price volatility, and valuation implications, by visiting https://www.investing.com/pro/NIO. These tips can provide further insights for those looking to make informed decisions on NIO's stock. In total, there are 13 additional tips available on InvestingPro, offering a comprehensive analysis of the company's prospects.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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