NIO attracts a bull rating from J.P. Morgan due to improved financials

J.P. Morgan upgraded NIO (NYSE:NIO) to an Overweight rating after having it set at Neutral. The firm said it likes the higher visibility on NIO (NIO) with new model initiatives and the pipeline into 2025.

Analyst Nick Lai also highlighted the rapid improvement in NIO’s (NIO) cash position and removal of some of the investor concerns about raising more funds or equity dilution risk. “With the stock price halving YTD and hence expectations low, we believe NIO may well exhibit a relief rebound beyond year-end, driven by financial and operational turnaround,” he noted.

J.P. Morgan lifted its second-half 2024 and 2025 volume estimates by 11% to 13% following a generally in-line Q2 revenue and margin result, despite higher operating expenses which drove a bottom-line miss. Looking ahead, the expectation is that NIO (NIO) sees a sharp decline in cash burn and better operating cash flow.

The firm’s price target on NIO (NIO) of $8.00 is based on a blended average of a 1.0X the FY25 price-to-sales estimate and 0.9X the FY25 EV/sales estimate.

FQ2 earnings recap: The Chinese electric vehicle maker reported revenue rose 98.9% to $2.4 billion. During the quarter that ended on June 30, better vehicle margin was offset by higher operating expenses. Gross margin was 9.7% in FQ2, compared with 1.0% a year ago and 4.9% in FQ1 of 2024. Notably, NIO (NIO) narrowed its net loss compared to a year ago due to the higher level of sales. NIO (NIO) said it expects to rack up deliveries of between 61,000 and 63,000 units in FQ3.

On Seeking Alpha, Livy Investment Research was bullish on NIO (NIO) following the earnings report, while Jonathan Weber warned the company’s track to profitability is still uncertain.

Shares of NIO (NIO) showed a 0.6% dip in premarket trading on Friday after cruising 14.4% higher on Thursday.