Deutsche Bank cuts price target on Nio ahead of 3Q report

© Reuters.

By Michael Elkins 

Deutsche Bank Securities reiterated a Buy rating on Nio Inc. (NYSE:NIO) and cut the price target to $20.00 (From $39.00) ahead of the company's 3Q earnings report. The electric vehicle maker is scheduled to report 3Q earnings this Thursday, Nov. 10th before US market opens.

Deutsche Bank is expecting Nio to report a "mostly decent quarter" with the potential for a headline margin upside from regulatory credits. However, analysts believe that investors' attention will be focused on the 4Q delivery outlook.

The analysts wrote in a note, "Looking at 4Q, we think true expectations have already naturally come down as COVID lockdowns severely disrupted production in October (only 10,059 units) and will likely still be a drag in the first half of November. We estimate NIO lost at least 2,000-3,000 units of production last month as it had to work with start-stop production, interrupting supply of parts and factory worker commutes. The greater impact was felt at the new NEOPark F2 plant which just began ramping up the ET5. The company did operate in a closed-loop manner for some days but this was rather inefficient. As of 11/3, the local lockdown measures have been lifted and production has resumed normal operations."

Deutsche Bank believes that, based on conversations, investors are very concerned about EV competition in 2023. Several new models have come to compete in the EV segment, and Tesla (NASDAQ:TSLA) recently cut the price of the Model Y. While Deutsche Bank believes that concern is warranted, they don't see NIO as very vulnerable beyond the older 866 models. Therefore, they cut SUV forecasts while leaving sedans mostly unchanged; this translates into a full-year delivery estimate of 260,000 (vs. prior 290,000), representing >100% YoY growth.

Shares of NIO are down 0.73% in pre-market trading on Tuesday.