NIO (NYSE: NIO) stock took a nosedive following a downgrade from JP Morgan.
JPMorgan has downgraded shares of NIO Inc. (NYSE: NIO) from Neutral to Underweight. The financial institution has also reduced the price target for NIO stock, now set at $5.00, down from the previous $8.50 target.
These adjustments come in light of the slower sales of NIO in January, raising concerns among investors about the company’s sales and earnings momentum as it heads into 2024.
The revised revenue forecast of JPMorgan for NIO in 2024 is roughly 10% below the Street consensus, as reported by Bloomberg. The conservative estimate of 191K units of JPMorgan suggests that the market might be overly optimistic with its sales volume forecast of 220-240K units.
JPMorgan on NIO Stock
JPMorgan has expressed concerns about the sales trajectory of NIO, citing the strategy of the company to launch just one new model under its Alps brand this year, aimed at the mass market. The company expects the model, projected to be priced between Rmb200-300K, to primarily boost sales in the last quarter of 2024, thus having a limited impact on the overall business for the year. The firm also highlighted the growing competition in the mass market from rivals such as XPeng (NYSE: XPEV), BYD (SZ: 002594), Geely, and Great Wall, along with the potential entry of Xiaomi (OTC: XIACF) into the industry.
On the bright side, NIO has focused on cost reduction and expense management. In the latter half of 2023, the company tactically cut back on sales discounts to safeguard its average selling price and profit margins. JPMorgan expects NIO to maintain its focus on cost control and fiscal discipline for the rest of the year. Furthermore, the company aims to revamp its product lineup in the second quarter of 2024.
NIO is also prioritizing technological progress, with the ongoing expansion of its Navigation on Pilot (NOP) service to additional cities in China, potentially increasing the appeal of its offerings. Given the recent regulations by the Chinese government that allow vehicles to have Level 3 semi-autonomous driving features from 2024, analysts anticipate that most new New Energy Vehicle (NEV) models will be equipped with Level 3 capabilities.
The downgrade in rating by JPMorgan suggests a cautious perspective on the ability of NIO to maintain its growth in sales and profits amidst fierce competition. The financial firm hints at potential downside risks to consensus forecasts.
NIO (NYSE: NIO) Stock Movement
NIO stock plummeted 7.69% to close at $5.40 on Friday. The traders had exchanged hands with 74,715,167 (74.71 million) shares compared to the average daily trading volume of 63.05 million.
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