NIO Stock: Analysts’ Sentiment before Its Q1 Earnings

NIO (NYSE:NIO) will likely release its results for the first quarter of 2020 on May 28. The stock has seen a lot of volatility in 2020. However, most of the major actions are on the downside. Let’s see analysts’ sentiment before the company’s first-quarter results.

Analysts’ sentiment for NIO stock

According to the data compiled by Thomson Reuters, 13 analysts cover NIO right now. Among the analysts, 15% recommend a “buy,” 62% recommend a “hold,” and 23% recommend a “sell.” The median target price is $3.5, which implies a downside of 6% from the current price levels. A year ago, 50% of the analysts recommended a “buy,” while 17% recommended a “sell.”

The stock fell hard after NIO’s earnings for the second quarter of 2019. The company reported worse-than-expected results and downgraded its guidance. Also, NIO reported a cash burn rate, which wasn’t getting replenished through cash from operations. The concerns shook investors’ confidence in the company. They were concerned about whether that company would be able to survive. As a result, many of the analysts also downgraded the stock.

Read Looking Ahead: Is the Worst Really Over for NIO Stock? to learn more.

Bank of America upgraded the stock

Recently, the company got a vote of confidence. On May 6, Bank of America analyst Ming Hsun Lee upgraded the stock from “neutral” to “buy.” The analyst also raised the stock’s target price by 47% to $5. According to The Fly, Lee turned positive on the stock due to its higher volume sales forecasts for 2020–2021. The analyst also thinks that the new EV purchase subsidy scheme should support the economy. He hopes that the company will see improved margins due to higher sales and cost reduction.

NIO’s stock price

NIO stock has declined by 19% year-to-date. In contrast, Tesla’s (NASDAQ:TSLA) stock price has risen by 95% during the same period. Tesla’s Shanghai Gigafactory has started operating in China. Also, Tesla has beat analysts’ expectations by reporting better-than-expected deliveries and results. To learn more, read How NIO is Failing Where Musk’s Tesla is Thriving.

NIO stock has fallen by 11.4% in the last three trading days. The stock has fallen due to concerns about delisting Chinese companies from US stock exchanges. As we noted in Delisting Impact: Alibaba, Baidu, and NIO Investors, the US Senate has passed legislation that would force Chinese companies to comply with US exchanges’ rules. If the companies don’t comply, they might lose their listings.

Analysts sit on the sidelines

The reason that led to mass downgrades for NIO still needs to be addressed. Recently, NIO got a lifeline in the form of a financing arrangement from the Hefei government worth 7 billion yuan. However, until the company addresses its cash flow concerns, analysts and investors’ sentiment towards the company might remain lukewarm.

Investors wait for NIO’s Q1 results

The company has some positive news. NIO reported strong deliveries growth from April. Will the company be able to continue this winning streak in May and other upcoming months? Will NIO be able to sustain its operations through its own cash? Investors will be watching NIO’s first-quarter results for some of the answers.