China’s Tesla Rival Just Had a Nightmare Week. It May Get Worse
NIO Just Had a Nightmare Week. It May Get Worse
(Bloomberg) -- NIO Inc. investors looking for a reprieve after the stock’s worst week ever are waking up to more bad news: Sanford C. Bernstein just slashed its estimate for the Chinese electric-vehicle maker to almost 50% below the current price.
Bernstein analysts led by Robin Zhu cut their price target to 90 cents from $1.70 -- the first to go below $1, according to data compiled by Bloomberg. The EV maker has lost more than 70% of its market capitalization, or about $5 billion, since its New York initial public offering a year ago. The shares fell as much as 13% to a low of $1.53 on Monday, adding to a 42% slide last week.
Now valued at just $1.6 billion, NIO embodies the challenges faced by China’s electric-car aspirants. The country’s highest-profile EV startup and the first to go public, NIO is “symbolically important,” Bernstein said. A failure would represent “an embarrassing setback for China’s EV ambitions,” damaging other local contenders’ fund-raising plans, the analysts said.
NIO last week posted a worse-than-expected second-quarter loss because of sputtering demand, rising costs and intensifying competition. Even with fresh money set to be raised from Chief Executive Officer William Li and shareholder Tencent Holdings Ltd., NIO may only have enough cash to stay afloat for weeks, according to Bernstein.
To fuel sales, NIO announced a plan to open 200 pop-up stores in more than 100 Chinese cities. Bernstein analysts are “skeptical” about the campaign’s chances of success, as the effort is costly and may fail to generate EV demand outside the 15-20 biggest cities.
NIO’s main options now are insolvency or a bailout by the Chinese government or another suitor, according to Bernstein. Still, a deal with the government could be difficult, as an investment in a bleeding company in such a capital-intensive industry might be viewed as a “misappropriation of state funds,” Zhu said by phone.
--With assistance from Catherine Larkin.
To contact Bloomberg News staff for this story: Chunying Zhang in Shanghai at czhang714@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Ville Heiskanen, Angus Whitley
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