Morgan Stanley analyst Tim Hsiao slashed price targets on three Chinese EV startups to reflect elevating macro headwinds and severe supply challenges over the past month.
Hsiao lowered the price target on Li Auto Inc (NASDAQ:LI) to $41.00 per share from $49.00, as well as on Xpeng Inc (NYSE:XPEV) and Nio (NYSE:NIO) shares to $42.00/$34.00, down from the prior $71.00/$66.00, respectively.
Hsiao remains Overweight-rated on all three stocks with a high conviction that shares can recover following a significant underperformance in recent months.
Since our last sector update in January, macro headwinds consisting of geopolitical tensions, pervasive Covid curbs and ADR de-listing risks have further aggravated operational challenges for the EV start-ups. These issues along with prolonged chip, battery and commodities supply disruption after CNY lead us to cut estimates/PTs. Despite the changes, we reiterate our OW ratings on NIO/Li/XPEV, Hsiao said in a client note.
The analyst shared 5 reasons why he remains bullish on these EV stocks:
- We believe electric vehicles remain a secular trend regardless of the economic cycle;
- EV trio remain the best downstream EV proxy to play China's EV ambitions;
- Early dual-listing on HKEx as downside protection;
- Valuations are now much more compelling and expectations are lower;
- Capability to better tackle supply disruption.
Nio stock price is up 0.5% in pre-market Wednesday while LI and XPEV shares are down over 1%.
By Senad Karaahmetovic