On Wednesday, CLSA adjusted its stance on shares of electric vehicle maker NIO Inc. (NYSE:NIO), moving its rating from Buy to Outperform. Alongside the downgrade, the firm also reduced its price target from $9.80 to $6.00.
The revision followed NIO's latest financial results, which displayed a modest 1.8% quarter-over-quarter decline in average selling price (ASP) to Rmb308k. This decrease was attributed to a combination of discounts and changes in the sales mix.
The company reported a 20.8% quarter-over-quarter increase in its net loss, reaching Rmb5.59 billion, which fell short of market expectations by 10%.
CLSA pointed out that NIO's scale has not yet achieved a level sufficient to mitigate these losses. Despite this, there are positive developments, such as the anticipated launch of NIO's sub-brand, Alps, in the third quarter of 2024, with expectations of mass deliveries beginning in the fourth quarter of 2023. Alps is touted to offer a favorable cost-performance ratio for consumers.
NIO has been actively expanding its infrastructure, notably its battery swapping network, with a target of over 3,300 swapping stations by the end of the year. This expansion is part of the company's ongoing efforts to enhance its service offerings.
However, in light of the slower growth trajectory, CLSA has revised its estimates and adopted a price-to-sales (P/S) valuation approach, anticipating a gradual improvement in profitability. This recalibration of expectations led to the lowered price target and rating downgrade for NIO's stock.
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