Recently, the shares of Nio Inc – ADR (NYSE:NIO), Chinese electric car manufacturer, had soared after it emerged that the company was going to get a cash infusion from the Hefei government. Considering the financial troubles that the company had been mired in, it was naturally welcomed with a great deal of optimism.
Citi Raises Doubts Over cash Trouble
However, the stock tanked on Monday after an analyst at Citi stated that the cash infusion might not signal the end of all troubles for the beleaguered company. The analysts pointed out that the performance of NIO has been ‘underwhelming’ in recent times. Following that, the NIO stock slid by as much as 0.50% as it suffered a mini selloff.
The announcement about the agreement with the Hefei government came last week. According to the terms of the agreement, NIO would also need to move large parts of its operations to Hefei province. Jeff Chung, the analyst at City, stated that while the company’s cash problems are going to be eased in the near term, there are other issues that need to be kept in mind.
He stated that the company is going to move its headquarters to Hefei, and that expense might put more pressure on the company in the event of continuing sales disappointment.
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However, that is not all. Chung also downgraded the stock from buy to neutral and also reduced the target price from $6.30 to $4.30. He went on to state that the economic problems might also hamper NIO sales, considering the fact that the electric car maker markets itself as a ‘luxury’ brand.
While Chung believes that sales will continue to be the week for NIO, he expressed optimism about a new energy vehicle stimulus that is going to kick in later on in 2020. The stock has gained as much as 5.2% over the course of the past month, and it is likely that it is going to be in investors’ focus over the coming days.
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Disclosure: we hold no position in $NIO, either long or short, and we have not been compensated for this article.