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Goldman Sachs upgraded Nio Inc (NYSE:NIO) from sell to neutral on Monday, raising its price target to HK$29.50 from HK$29.00. The upgrade reflects the investment bank’s confidence in the Chinese electric vehicle maker’s cost reduction strategy.
Goldman Sachs analyst Tina Hou cited management’s cost reduction efforts as a key factor in the decision, projecting these initiatives would improve the company’s profit levels by 4%-10% over the next three years. The new 12-month DCF-based target price implies an 8% upside for U.S. shares and 7% for Hong Kong shares.
Nio’s stock has underperformed significantly since Goldman Sachs added it to its sell list on November 25, 2024. The company’s American Depositary Receipts fell 25% while its Hong Kong shares dropped 28% during this period, compared to gains in broader market indices.
The S&P 500 rose 1% in the same timeframe, while the HSCEI index gained 26%. Other covered new energy vehicle peers outperformed Nio with an average gain of 37%, according to Goldman Sachs.
The investment bank attributed Nio’s stock underperformance to widening net profit losses and cash outflow issues, challenges the company is now addressing through its cost reduction initiatives that prompted the rating upgrade.
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