NIO Inc. (NIO) shares soared more than 15% during Wednesday's session after Goldman Sachs upgraded the stock to a Buy rating with a price target of $6.40 per share. Analyst Fei Fang cited abating liquidity risk and a narrower cash burn following the "battery incident," as well as a 37% improvement in delivery volumes between January and April.
It's the first time that a domestic premium car brand has had a waiting list of buyers, joining the likes of Toyota Motor Corporation (TM), Tesla, Inc. (TSLA), and select Lexus models, added Fang in the research note. Last week, NIO announced first quarter revenue that fell 53.2% to $193.76 million, beating consensus estimates by $18.16 million, while GAAP EPADS came in at -$0.23, beating consensus estimates by one cent per share.
The China Association of Automobile Manufacturers announced an 11.7% increase in May vehicle sales to 2.14 million. While it's the second consecutive monthly increase, year-to-date sales are still down an estimated 23.1% to 9.7 million. Sales are forecast to drop 15% to 25% for the full year, depending on how the remainder of the pandemic turns out.
From a technical standpoint, NIO stock extended its gains from the past three sessions. The relative strength index (RSI) moved into overbought territory with a reading of 76.38, but the moving average convergence divergence (MACD) accelerated its trend higher. These indicators suggest that the stock could see some consolidation before extending its move higher.
Traders should watch for consolidation below trendline resistance and above trendline support over the coming sessions. If the stock breaks out, traders could see a move toward fresh highs. If the stock breaks down, traders could see a move back into its previous price channel or a move to reaction lows and the 50-day moving average at $3.31.
The author holds no position in the stock(s) mentioned except through passively managed index funds.