Stock Market Analysis

Why NIO Stock Is Rising Today

A former bear had a change of heart — and for good reason.

This article originally appears on The Motley Fool, written by John Rosevear.

American depositary shares of Chinese electric-vehicle maker NIO (NYSE:NIO) are rising today, up about 8.6% as of 10:30 a.m. EDT, after a once-bearish analyst upgraded the stock.

So what?

In a new note released before the market opened on Tuesday, UBS analyst Paul Gong upgraded NIO to neutral from sell and raised his price target to $16.30 from just $1.00. (For reference, NIO’s shares were trading at $16.25 as of 10:30 a.m. EDT.) 

Gong was bearish on NIO not long ago. While he didn’t go as far as rating it a buy, his upgrade represents a significant change of heart, and the reasons for the change seem sound: The company’s fundamentals have improved.

Gong noted that NIO’s sales volumes recovered nicely in the second quarter and that the company guided to continued sales strength in Q3. NIO also delivered on its promise to improve gross margin, he wrote, and that, plus the company’s successful capital raise in June, have “assuaged” his prior concerns about its balance sheet. 

Now what?

With all that said, Gong still thinks that auto investors should be cautious here. While he concedes that there’s strong global interest in NIO’s electric-vehicle “story,” he thinks the company will need additional cash to fund its growth and may need to do another capital raise at some point. 

I agree with Gong that NIO might need to raise more capital eventually. But if CEO William Bin Li and his team continue to execute as they have over the last several months, I don’t think that NIO will have much trouble raising additional cash if and when it’s needed.

Just look at our returns versus that of the S&P 500! Click here to find out how we continue to beat the market and view the list of stocks we think will turn out to be the next Amazon, Tesla, or Netflix!

Read more from MyWallSt:


MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above Read our full disclosure policy here.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The Motley Fool
The Motley Fool
The Motley Fool has been one of the industry's experts for years and is one of our contributors here at MyWallSt.