Chinese EV stocks have been among the most beaten-down assets in the market. Whether we’re talking about Nio (NYSE:NIO), XPeng (NYSE:XPEV) or Li Auto (NASDAQ:LI), the declines many of these EV makers have seen since their peaks during the last hype-driven bubble have been stark to say the least.
Unlike other major tech names, Chinese EV makers have seen diminished demand, as investors appear to be moving toward other technology sectors with more growth potential. Chinese demand has cooled, and price cuts have taken center stage. This should bleed through to lower margins over time and lower cash flows as well. And since a stock price should represent the future value of all future cash flows, that’s not great for this group.
That said, today’s price action in the aforementioned three Chinese EV stocks is very positive today. XPeng is leading the way with double-digit gains (around 11% at the time of writing), Nio has surged more than 9% and Li Auto is up more than 7%.
Here’s what’s driving that move today.
Key Morgan Stanley Note Drives Chinese EV Stocks Higher
Analysts at Morgan Stanley have added Nio, XPeng and Li Auto to their tactical ideas list, reportedly seeing near-term upside for the group. Anytime a broader sector group is targeted as a whole, investors’ ears tend to collectively perk up. That’s especially true for these three names, which were called out as potential winners in the Chinese EV sector.
This is a short-term call, with analysts noting they see an upside over the next 15 days. Accordingly, with some investors having an investing time horizon of 15 years, this sort of advice may not necessarily be worth paying attention to.
But traders have clearly picked up the scent of a stock group that could be due for a nice rally. Given how far these stocks have fallen, any sort of catalyst could have led to today’s pop. Interestingly, Wall Street analysts are the ones leading the charge for these Chinese EV makers.
We’ll have to see how this stock performs over the next 15 days, and I’m going to set a calendar reminder to see how this call goes. Given today’s move, the probability of success is pretty high right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
