Macquarie downgrades NIO on weak guide, demand concerns

Investing.com - Macquarie downgraded NIO Inc (HK:9866). to "neutral" from "outperform" and hacked its price target by 27%, citing disappointing fourth-quarter guide and concerns about slowing demand.

The brokerage flagged weaker sales for NIO’s core brand and a slower-than-expected production ramp for its Onvo line as key issues.

NIO’s fourth-quarter revenue guidance, set between RMB 19.7 billion and RMB 20.3 billion, fell 18% below consensus estimates. Vehicle delivery expectations of 72,000 to 75,000 units were also well below market forecasts. Macquarie noted that demand for Onvo has been impacted by the upcoming expiration of local purchase subsidies, which affected over half of the orders.

Third-quarter results highlighted additional challenges. Revenue of RMB 18.7 billion missed consensus expectations by 3%, while operating losses were 13% worse than analysts’ estimates due to higher costs from NIO’s multi-brand strategy. Revenue per vehicle dropped 12% year-on-year as a result of a higher mix of lower-priced models.

Despite generating RMB 600 million in positive cash flow during the quarter and holding RMB 42.2 billion in cash reserves, Macquarie remains cautious. The firm expressed uncertainty over whether Onvo demand will recover as expected and raised concerns about broader demand weakness.

Macquarie valuation of NIO is now a lower forward price-to-sales multiple, cutting its price target to HK$38.00 ($4.80) from HK$52.00 ($6.60)