BofA raises NIO price target by 140% to $54.7, reiterates Buy rating

BofA Securities analysts led by Ming Hsun Lee raised the price target of NIO by about 140 percent from $23 to 54.7, saying the Chinese EV maker is set to benefit from market share gains, overseas contribution, and robotaxi.

In a report published on Wednesday, the analysts reiterated the Buy rating on NIO and said it is unlikely to de-rate unless its sales volume misses consensus significantly.

NIO is a leader among Chinese auto OEMs in terms of autonomous driving, which should help it gain share, the report said.

Its unique BaaS model – only NIO is able to offer BaaS in China as its battery is swappable – this offers more flexibility for consumers to choose the suitable battery pack, and enhances user experience, the report said, adding “we expect its market share to grow to 9.2% in 2022, based on the aforementioned advantages.”

NIO shares went down by 1.33 percent in pre-market trading on Thursday.

NIO Q3 revenue up 146.4% year-on-year to $666.6 million, beating estimates

NIO reported third quarter results and hosted a conference call on 18 November. Its deliveries for the third quarter came in at 12,200 units, up 154% year on year.

Revenue grew 146% YoY to RMB4.5bn. 3Q vehicle margin reached a record-high of 14.5% vs. 9.7% in 2Q20, while gross margin also reached a record high of 12.9% vs. 8.4% in 2Q20.

NIO also achieved second consecutive positive operating cash flow in 3Q20 and management expects to achieve positive operating cash inflow in FY20.

In September, NIO increased its monthly production capacity to 5,000 units per month.

BofA raised its 2020/21/22/23 sales volume forecast by 8%/30%/37%/15% for NIO. Our 2021/22/2023 sales volume forecast is 12%/5%/11% higher than consensus, driven by:

(1) more positive view on NIO's strategies – through its focus on user experience enhancement [autonomous driving, battery swap, and Battery-as-a-Service (BaaS) model], it will gain share faster,

(2) potential overseas contribution starting from 2022; and

(3) cooperation with Mobileye on robotaxi in China.

NIO has already set up 159 battery swap stations in China, as of November 2020, and we expect this to expand to 350-400 by end-2021 to cover more cities and improve users' range anxiety.

With supportive policies such as the opening of BaaS, more advanced AD capability (Navigate on Pilot (NOP) and Power Up Plan revealed at Beijing Auto show), and user experience enhancement through the expansion of battery swap station and charging station to reduce consumers' range anxiety, BofA expects NIO's share in China EV market to rise from 2% in 2019 to 9% in 2022.