Nio can rally 40%, HSBC said
“We anticipate Nio’s volume growth momentum to accelerate as a result of strong EV demand, a competitive premium EV proposition, and established brand traction,” the firm said.
Based on higher revenue growth expectations, the firm raised its price target on U.S.-listed shares to $69, or about 51% higher than the stock’s closing price on Thursday. The previous target for HSBC was $54.
Nio announced earlier this month that it delivered an all-time high 8,083 vehicles in June, bringing its total for the second quarter to 21,896. For the period, the company expected deliveries to range between 21,000 and 22,000 units. The June figure follows a drop in May as a result of a global chip shortage that harmed Nio’s business.
Nio has delivered over 41,900 vehicles in 2021, nearly matching the total of 43,728 in 2020.
According to HSBC, Nio’s established position in the electric vehicle market gives it a first-mover advantage as vehicle sales grow.
“We expect Nio’s strong brand traction, solid product offering, and solid reputation among existing car owners to drive its continued volume growth,” analysts led by Yuqian Ding wrote in a client note. “With its existing SUV models and the soon-to-be-introduced sedan series, as well as its in-house autonomous driving software, we believe Nio will establish itself in the premium EV segment.”
The firm’s belief that electric vehicle sales in China will continue to rise underpins HSBC’s bullish call on Nio. Ding stated that through May, NEV sales, or new energy vehicles as they are known in China, increased 236 percent year over year, compared to 38 percent growth in the overall auto market.
“In our opinion, Generation Z is the most tangible car buyer group for the next decade, and they are more electric vehicle friendly,” he said.
HSBC increased its 2025 and 2030 electric vehicle penetration estimates to 22 percent and 45 percent, respectively, from 19 percent and 39 percent. According to the company’s bull case scenario, EVs will account for 71% of the market by 2030.
HSBC also rates Contemporary Amperex Technology Co Ltd and BYD as buys.
Nio’s stock was slightly lower in afternoon trading on Wall Street. They are down 6% for the year, but up nearly 213 percent over the previous year.
Best stocks to own during earnings
According to analysts, this earnings season is widely expected to be positive, and these companies may benefit.
Square, Alibaba, Domino’s, Netflix, and Signature Bank are among them.
Shares of several Chinese companies listed in the United States fell after Chinese authorities announced that China ride-hailing company Didi was the subject of a cybersecurity investigation.
Alibaba was no exception, with shares ending the week down nearly 5.4 percent.
According to UBS analyst Jerry Liu, investors should ignore the noise and stick with the stock.
“We believe the stock’s risk/reward should gradually improve from here,” he said.
In fact, Liu wrote that regulation should not be the primary concern for shareholders at the moment.
“Regulation continues to tighten, but competitive concerns are critical right now, especially as Alibaba begins an investment cycle,” the firm added.
In a note to clients, Liu acknowledged that China’s crackdown was a minor concern, but he predicted that patient investors would be rewarded as the e-commerce company ramped up investments and gained market share.
“We believe Alibaba will continue to be an efficient way to capture long-term consumer and enterprise digitalization trends in China,” Liu said.
Signature Financial Institution
Signature has piqued the interest of investors and analysts in recent months due to its rapid adoption of cryptocurrency, but there’s so much more to the regional bank, according to Wells Fargo analyst Jared Shaw in a note this week.
Signature shares are up 89 percent this year, and with earnings due later this month, investors should brace themselves, according to Shaw.
“We continue to believe that SBNY has more positive catalysts than any other bank, and we believe that shares will eventually reach a 3x tangible book value valuation,” he wrote.
Shaw also stated that the bank is a major beneficiary of higher rates because it is more leveraged than some other banks.
“Shares have shifted from being one of the few liability sensitive banks in 2015 to now having the third highest asset sensitivity,” he said.
The firm also noted that whenever the company’s management speaks or provides an update, shares of Signature’s stock tend to trend higher.
“We expect shares to react favorably to 2Q actual growth, but we believe SBNY’s now industry-leading asset sensitivity remains underappreciated,” Shaw said.
“SBNY [is] the name to own for the second quarter and beyond,” he added.
According to investment firm Baird, the pizza chain restaurant was undoubtedly a beneficiary of the coronavirus, but it should continue to be a big winner during the recovery.
Domino’s is set to report second-quarter earnings on July 22 and is expected to meet or beat earnings per share, according to analyst David Tarantino.
Furthermore, Tarantino stated, “we see potential for DPZ’s domestic comps to meet or exceed estimates.”
Meanwhile, the stock is up only 2.3 percent this month, and Tarantino advised investors to take advantage of any weakness.
“After the shares’ recent strong outperformance, we would be more aggressive buyers on pullbacks and less aggressive buyers on further strength, with an eye toward our new $510 price target,” the firm wrote.
Looking ahead, the company stated that management has several levers at its disposal, including a greater emphasis on carryout sales, increased advertising spending, and menu variation.
Given this outlook and our continued positive view of the company’s attractive compounding growth characteristics, we remain bullish on DPZ,” he said.