Goldman Sachs Downgrades NIO Stock, Sell-Off Ensues



Goldman Sachs analyst Fei Fang downgraded NIO (NYSE:NIO) stock from “neutral” to “sell” on July 17. As reported by The Fly, Fang believes the stock price reflects “over-optimism.” He said the stock’s 89% rally in the past month doesn’t accompany any substantial changes to volume or profit expectations.

The analyst, however, is still positive about long-term investments in NIO, given “China’s structural auto premiumization and EV adoption, as well as the ‘scarcity of being China’s first home-grown high-end passenger vehicle brand,’” according to The Fly.

Goldman Sachs’s previous ratings for NIO

On June 2, Goldman Sachs upgraded NIO from “neutral” to “buy.” Then, 22 days later, the analyst downgraded the stock from “buy” to “neutral,” based on its valuation. And 25 days after that downgrade, he again downgraded NIO.

NIO stock skyrocketed by 89% due to record deliveries for June, assuring investors of the company’s consistently strong operational performance. After the strong sales report, momentum trading also buoyed the stock to historic highs.

Goldman Sachs’s downgrade dragged down NIO

Due to GS’s downgrade on July 17, NIO stock gave up 14% of its gains. Although I believe this sell-off was overdone, some was overdue. Due to momentum trading, the stock got ahead of itself in the short term. As we’ve discussed, long-term investors should accumulate this stock on pullbacks. However, in the medium-to-long term, there are several catalysts that could propel the stock much higher.

Outlook for NIO stock

Wall Street analysts’ recommendations and ratings usually NIO’s stock price rather than predicting it. However, ratings from well-known investment banks such as Goldman Sachs can move the stock price significantly.

There might be a hangover from the downgrade for a few more sessions. However, the stock should then start its ascent as positive catalysts materialize. The more gradual this ascent is, the better.

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