Nio Inc's (NYSE:NIO) stock has had a tough time over the last few years, leaving many investors hoping for a turnaround in the Chinese electric vehicle company’s fortunes.
However, one investment bank revealed in a note this week that they see further downside for the company’s share price, with full-year consensus estimates “at significant risk.”
Nio stock weakness
Nio’s stock has fallen some way from its 2021 highs of over $65 per share. The company’s share price now sits around the $4.64 mark (as of the close on April 1, 2024) after a 48% decline in 2024 and a 55% fall over the last 12 months.
Premarket Tuesday, Nio shares are down a further 2%, despite a more than 3% gain in the previous session on the back of its latest deliveries report, which saw it deliver 11,866 vehicles in March, a 45.9% jump from the month before.
Even so, first-quarter sales of 30,053 vehicles fell short of the anticipated 31,000 to 33,000 range.
The report prompted Morgan Stanley to reiterate an Overweight rating and $10 per share price target on Nio. The bank said that based on weekly sales stats, March sales suggested a notable uptick into month-end.
Nio stock rating cut at Barclays
However, Barclays did not share the same view, downgrading Nio to Underweight from Equal Weight and lowering the price target to $4 from $5 per share.
Analysts at the bank said weaker March sales suggest NIO’s troubles in selling its 2024 models. The models were launched in March. According to the firm, this puts the company’s 2024 FY consensus estimates at significant risk.
“With weaker than expected deliveries in March, NIO’s Q1 deliveries came in in line with revised guidance of 30k provided on March 27 but below its original guidance (31k-33k) provided on March 5,” said Barclays.
“Importantly, the miss reflects weaker sales momentum of the new 2024 models, which were just launched in early March. With limited new product launches in the pipeline planned for the rest of 2024, we see significant risks for NIO's ability to meet consensus estimates for the reminder of the year.”
Looking at the longer-term picture, Barclays believes the hyper-competitive electric vehicle market in China is set to become even more competitive.
“For the segment in which NIO competes, which is higher-end SUVs and sedans, Huawei has recently entered the market with a best-selling SUV and will soon launch a second model, and BYD’s higher-end brand Danza continues to upgrade existing models and launch new ones,” notes Barclays.
They also highlight the fact that Xiaomi (OTC:XIACF) entered the market over the past weekend with some “highly competitive EV sedan models as well.”
As a result, they feel that NIO now faces even more intense head-to-head competition with these “strong and much larger competitors,” and, as a result, Nio “may lack the necessary scale and resources to succeed.”