Shares of US-traded Chinese electric car makers - NIO, XPeng, and Li Auto - all rose sharply as Citi issued a bullish report.
By Wednesday's close, NIO was up 6.23 percent to $37.71, XPeng was up 23.32 percent to $27.39, and Li Auto was up 5.24 percent to $25.31. All three companies' stock prices hit all-time highs.
In a report sent to investors on Tuesday, Citi analyst Jeff Chung raised his NIO (ticker: NIO) price target by 40% to $46.40 from $33.20, keeping his Buy rating. The target is the highest on Wall Street and is 31% above Tuesday's closing price of $35.50.
Citi said it is optimistic about NIO based on the following factors: it benefits from strong order backlog and high margin visibility; its margin is expected to reach 13-16% in the third quarter and further to 22-25% in the fourth quarter; its increasing market share; decreasing battery costs; and it is expected to benefit from favorable export-related policy winds.
NIO stock was up more than 6% on Wednesday, adding to its spectacular year-to-date gains. As of market close, NIO had risen about 800% in 2020.
Chung also initiated coverage of Li Auto (LI) and XPeng (XPEV).
He rates XPeng at Buy and has a $34.70 price target for shares. That's about 56% higher than Tuesday's close.
He rates Li Hold and has a $27 price target on the shares. That's about 12% higher than Tuesday's close.
It's also worth noting that Chinese investment bank CICC on Wednesday that the valuation of the new energy vehicle sector has hit a new high, with BYD and NIO having become China's first and second largest car companies by market capitalization. Valuations have stretched as the new Chinese car maker has significantly surpassed or approached Tesla's price/sales ratio in 2021.
However, the strong near-term trend for these leading EV makers is sustainable despite their move away from our valuation system and into marginal pricing, CICC said.