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A Nio vehicle outside the New York Stock Exchange in September 2018.
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Goldman Sachs analysts reversed their stance on Nio Inc., saying that in hindsight they underestimated the benefits the Chinese electric vehicle maker would reap from breakthroughs such as its battery replacement idea.
Analysts, led by Fei Fang, improved Nio’s NIO,
stock to hold equivalent, to sell, saying in a note Tuesday that when they tacked on their sell note in July, they did so on valuation. They felt that “the share price at the time reflected excessive optimism given the lack of substantial changes in volume / earnings expectations.”
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What changed? Importantly, Nio unveiled its battery-as-a-service program, expanding its market. Most households in China do not have the conditions to install private chargers, especially outside major cities, Goldman said.
Analysts also increased their 12-month target price on Nio’s U.S. certificates of deposit to $ 59.00 from $ 7.70.
Nio launched its battery-as-a-service program in August; service users buy a battery-less Nio car, “which makes it more competitive with existing powertrains, while still providing the flexibility to change battery capacity to suit their needs,” Goldman analysts said .
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Existing public charging stations are often busy, but in less than 10 minutes Nio car owners can swap out their depleted battery for a fully charged battery, which is much more efficient than dropping out the fast charger which takes around 2 minutes. ,5 hours.”
“In addition, (battery as a service) also represents a systematic solution to long-standing challenges for electric vehicle penetration, including battery degradation, battery scalability and lower resale value.” , they said.
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Nio’s ADRs have advanced nearly 1,100% this year, compared to gains of around 13% for the S&P 500 index. SPX,
The average rating on Nio of the 13 analysts surveyed by FactSet is the equivalent of buying, and the average price target on ADRs is $ 42.18, which is an 11% drop from the prices of Tuesday.
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