An investment upgrade from JPMorgan (NYSE: JPM) on Wednesday caused shares of Nio (NYSE: NIO) to pop 22% to $26.50.
The Wall Street giant says the Nio is overweight, an upgrade from its previous rating of neutral.
JPMorgan issued the upgrade primarily due to the increasing demand for electric vehicles in China.
Furthermore, JPMorgan expects the stock to reach $40 per share by June 2021 based on a price target that is 3x enterprise value-to-sales. With the stock reaching $21.62 on Tuesday, that represents nearly double the stock price.
As part of the new valuation, JPMorgan expects Nio to report a 12% increase in gross profit margins during its upcoming earnings call on November 10.
By 2025, JPMorgan expects NIO to capture 7% of the total EV market, including 30% of premium EV sales.
This new projection was written by JPMorgan analyst Nick Lai, who projects that Nio will debut another new vehicle in December. Lai is also encouraged by the growing number of orders for NIO’s vehicles.
Lai had a slightly different tune in August when it came to Nio. Two months ago, Lai listed Nio with a $14 price target. While Lai cited the growing demand, he kept his rating at neutral.
“On the flip side, we believe valuations are getting stretched and expect to see a share price pullback near-term, hence our neutral stance,” Lai wrote in August.
Today, Lai admitted that JPMorgan got it wrong two months ago.
“We missed the stock's major rally YTD,” Lai wrote today.
Nio’s stock is up almost 600% in 2020.
Lai adds that despite the increase in stock price, investors can still get in on NIO now.