What happened
Actions of the Chinese manufacturer of electric vehicles NIO (NYSE: NIO) It opened lower on Friday, after a Goldman Sachs analyst urged caution and downgraded the shares in a new note.
As of 10 am EDT, shares of NIO’s US depositaries fell approximately 9.5% from Thursday’s closing price.
And that
In a new note released early Friday, Goldman Sachs analyst Fei Fang downgraded its NIO share rating to sell from neutral while maintaining its previous price target of $ 7.
Fang’s reasoning for recommending that automotive investors sell NIO’s shares is simple: after a 89% rebound in the past month, with no significant change in the company’s history, he believes that NIO’s current stock price it reflects an “excess of optimism”. (My opinion: you’re probably right).
Image source: NIO.
Despite his sales recommendation, Fang is not exactly pessimistic about NIO’s long-term prospects. The analyst, who had a NIO share buy rating just six weeks ago, wrote that the long-term investment case is based on structural forces in China’s vast auto market that point to the growth of premium brands and sales of electric vehicles in general, too. as the specific appeal of NIO as “China’s first local high-end passenger car brand.”
Simply put, in Fang’s opinion, the company has the potential for a bright future, but the share price has risen beyond levels warranted by short-term fundamentals.
Now what
It will be interesting to see how top NIO executives respond to the rapid acceleration in the company’s stock price in recent weeks. While the recovery was likely triggered by NIO’s very strong second-quarter sales report, it may be time for the company to lower investor expectations.
We’ll see what happens when the company reports its second-quarter earnings results, probably sometime next month.
