It’s no surprise that Chinese electric vehicle (EV) maker Nio (NIO) – Get the report from NIO Inc. (China) suffered since the beginning of the year. The market is skeptical of both Chinese stocks and electric vehicle stocks.

However, Nio recently announced that it will start trading on the Hong Kong Stock Exchange next week. Wall Street analysts expect the move to mitigate the company’s political risk and send its shares on a rally. Here’s why.

Figure 1: NIO Stock: Why Wall Street expects it to rally

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Coverage against reimbursement

Since Beijing’s latest regulatory measures pushed Chinese stocks to the point of pulling out of U.S. markets, shares of companies across a variety of industries – including Nio, Alibaba (BABA) – Get the report from Alibaba Group Holding Ltd.JD.com (J.D.) – Get the report from JD.com Inc.and Baidu (BIDU) – Get the report from Baidu Inc. – have falled.

Chinese regulators are particularly concerned about the US Securities and Exchange Commission’s requirement that US-listed companies share data with the agency and allow it to conduct audits of their activities.

In the case of Nio, the company’s management has indicated that it will still abide by the rules of US regulators and plans to make its secondary listing in Hong Kong on March 10.

Unlike Chinese competitors XPeng (XPEV) – Get Xpeng Inc report and Li Auto (LI) – Get Li Auto Reportwhose primary listings are in Hong Kong, Nio has already completed two years of listing on the NYSE and qualifies for a secondary listing in Hong Kong.

Bernstein analyst Eunice Lee recently wrote that Nio’s listing in Hong Kong could create a hedge against its potential delisting from the NYSE. The main disadvantage of a secondary listing is that Nio would not be able to raise capital by issuing new shares over the next six months.

Additionally, Nio is also seeking a listing on the Singapore Stock Exchange.

Electric vehicle industry macro fears Nio earnings

Rising inflation… rising interest rates… supply chain disruptions… The Russian invasion of Ukraine is expected to further aggravate these global economic headwinds.

And these headwinds will have a direct impact on manufacturers of electric vehicles. For example, Rivian (RIVN) recently announced that it would increase the price of its vehicles by up to 20% to offset the high costs it has already absorbed.

Nio will report its results on March 24, and investors are worried about what to expect in 2022. How will all of these headwinds affect the company’s growth?

It is likely that the turbulent macroeconomic environment will dictate not only Nio’s performance in the short to medium term, but also that of the automotive industry in general.

Is Nio a Double Bagger?

Even in the uncertain macroeconomic environment, the consensus among Wall Street analysts regarding Nio’s stock remains bullish as ever. Analysts believe its trading fundamentals are at their most attractive multiples since 2020 and political risks are fading. Nio is currently at a discount of over 64% since its all-time high in January last year.

Based on 13 analysts covering NIO, the consensus is for an average price target of $52.59 over the next 12 months. This implies an upside potential of more than 140%.

Below we list some of the key notes on NIO:

  • The attractive valuation characterized by its discounted cash flow and innovative battery trading model are key reasons why CSLA analyst Soobin Park sees NIO rising up to 60% by 2022, with a price target of $35. Still, Park believes that even in the face of macro headwinds, NIO’s investment thesis remains intact.
  • Slightly less bullish JPMorgan analyst Nick Lai still believes that NIO has a relevant upside ahead. He has set a price target of $30, which implies a 37% upside in the coming months. Lai believes Nio will benefit from market penetration of electric vehicles due to its premium prices in China. Also, he believes that the launch of his new model scheduled for 2022 will allow a good increase in sales.
  • Finally, Citi analyst Jeff Chung believes that Nio’s listing on the Hong Kong stock exchange should alleviate the political risks that have haunted the stock over the past six months. Thus, he expects a short-term positive reaction in NIO and has set a price target of $87.

(Disclaimer: This is not investment advice. The author may own one or more stocks mentioned in this report. Additionally, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)