Why NIO and Xpeng are Wall Street’s Favorite Chinese EV Stocks

(Barron’s) – NIO and Xpeng are the biggest potential winners among the U.S.-listed Chinese electric vehicle makers, according to Citigroup, which weighed in on the stocks on Wednesday.

Citi analyst Jeff Chung raised his NIO (ticker: NIO) price target to $46.60 from $33.20, keeping his Buy rating on the stock. The target is the highest on Wall Street and is 31% above Tuesday’s closing price of $35.50.

NIO stock was up about 6% in premarket trading, adding to its spectacular year-to-date gains. As of the close on Tuesday, the stock had risen about 780% in 2020.

Chung also launched coverage of Li Auto (LI) and Xpeng (XPEV). He rates Li Hold and has a $27 price target on the shares. That’s about 12% higher than recent levels.

He rates Xpeng at Buy and has a $34.70 price target for shares. That’s about 56% higher than recent levels.

Chung’s views align closely with those of his peers. Xpeng, overall, appears to be the Street’s favorite Chinese EV stock. About 85% of analysts covering the stock rate it at Buy, well above the 58% average Buy-rating ratio for stocks in the Dow Jones Industrial Average. The analysts’ average target for the stock price is roughly $26, about 20% above recent levels.

More than 60% of analysts rate NIO shares Buy as well, while the comparable figure for Li Auto is 78% Buy-rating ratio. But the average analyst price target for NIO stock implies a gain of roughly 15%, while the implied gain for Li Auto stock is less than 10%. Analysts see more upside in NIO stock than in Li shares.

It is clear that analysts still like the Chinese EV sector despite how rapidly the shares have risen this year. EV stocks Barron’s tracks are up more than 360%, on average, so far in 2020.

Over the past month, those EV stocks are up 1.3% on average, better than small comparable declines of the S&P 500 and Dow Jones Industrial Average.

But the performance of the group varies widely over the past month. EV trucking stock Hyliion (HLYN) stock, for instance is down more than 50% while NIO shares have gained more than 60%. Trading has been wild.

NIO is the largest of the three publicly traded Chinese EV players. It delivered more than 5,000 vehicles in October. Xpeng delivered just over 3,000 EVs. Li Auto, for its part, delivered 3,692 vehicles.