Nio (NYSE:NIO) stock may be falling today, but the company has just received some good news. JPMorgan has removed its bear rating on the Chinese electric vehicle (EV) producer.
The financial institution moved its rating for NIO stock from “underweight” to “neutral,” demonstrating that it believes the company is improving. Analyst Nick Lai has stated that he sees Nio benefitting from its foray into the EV battery space, as well as policies from China’s government aimed at spurring EV demand. As Wall Street sentiment toward Nio is mixed, this development bodes well for the struggling EV stock.
However, while this new take is still positive, the investment bank still isn’t calling NIO stock a “buy.” This raises some questions regarding the company’s growth prospects.
What’s Happening With NIO Stock
Despite this positive update, it hasn’t been a good day for NIO stock. Shares fell as trading began today, and while Nio’s current trajectory is positive, it is still down more than 8%. This decline can likely be attributed to general negative market momentum that is pushing other Chinese EV stocks down. Nio peers XPeng (NYSE:XPEV) and Li Auto (NASDAQ:LI) are both in the red, although not by as much.
Even so, investors can take some comfort in the fact that JPMorgan’s stance on Nio is improving. Lai praised the company’s battery-as-a-service (BAAS) strategy, speculating that it can help drive growth. “By successfully lifting the take rate, NIO effectively broadens its addressable market and lowers the entry price point for the mass BEV segment of below Rmb300k for two important volume models – the ES6 and ET5 (accounting for 75% of sales in 2023,” he added.
While Lai maintains a “hold” rating for NIO stock and maintains a bearish $5.40 price target, he still sees an upside potential of more than 2%. Other Wall Street banks, including Goldman Sachs and Macquarie, also rate it as a “hold” and maintain even lower price targets. But despite its recent struggles, Nio has demonstrated impressive growth over the past month and remains above the penny stock line.
Why It Matters
Some experts will likely point to the fact that NIO stock is down almost 40% year-to-date (YTD). It’s true that such a statistic is hardly encouraging. But JPMorgan isn’t counting the company out, and this less negative sentiment could spread. As InvestorPlace contributor Achintya Pasricha reports:
“In a capital-intensive sector such as automobiles, bad financials at an early stage aren’t indicators of poor performance. As the EV sector grows at a CAGR of 15.5% until 2032 in just the US, this company is likely to produce fantastic results.”
Nio will have to make significant progress before some investors will be reassured that it can return to previous levels. And the company is working hard to do just that, and as Lai highlighted, its BAAS ventures are likely to be a catalyst in the coming year.
It’s not unreasonable to think that NIO stock can spend the coming months making slow, steady progress.
On the date of publication, Samuel O’Brient 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.
