Morgan Stanley reiterates overweight rating on Nio after Chinese EV maker’s 90% rally in 60 days

Morgan Stanley is maintaining its "overweight" rating on Nio, even after the Chinese EV maker's shares surged over 90% since June, reaching the firm's $6.50 price target. Analyst Tim Hsiao attributes this continued bullishness to robust pre-orders for Nio's new, more affordable ES8 SUV, which has garnered over 30,000 deposits and is expected to significantly boost monthly delivery run rates to 40-50k units from October. This sustained investor confidence and operational momentum, despite ongoing debates on recovery sustainability, underpin Nio's perceived ability to navigate the accelerating auto industry shakeup.

Analysis

Morgan Stanley is reaffirming its overweight rating on Nio, even as the stock's over 90% surge since June has met the firm's $6.50 price target. The sustained bullishness is primarily attributed to the strong market reception of the new, more affordable ES8 SUV, which has reportedly garnered over 30,000 pre-orders with refundable deposits. This robust initial demand underpins a forecast for Nio's monthly delivery run rate to reach 40,000-50,000 units starting from October. The market momentum is described as 'self-reinforcing,' where the share price performance is seen as correlated to the company's ability to secure financing for its operations and strategic goals. This is further evidenced by a significant spike in trading value, which exceeded $2.5 billion in two days, and a notable shift in investor sentiment, with client inquiries moving from concerns over demand risk to interest in future product launches like the L60 and L80.

Key Decisions for Investors

• Investors should closely monitor the conversion rate of the 30,000 ES8 pre-orders into firm sales and the initial delivery numbers starting in late September, as these are the key catalysts validating the projected ramp-up in production to 40-50k units per month.
• Given the stock has already rallied 90% to meet the current price target, new capital deployment should be weighed against the risk that near-term positive news is already priced in, while existing holders may see the stock's self-reinforcing momentum as a reason to maintain their position.
• While analyst sentiment is positive, the sustainability of the recovery remains a point of debate, so it is prudent to track the actual demand post-launch and Nio's ability to execute operationally amid the broader auto industry shakeup.