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Why Nio Shares Are Higher Today, Despite China Angst


What happened

Protests over China’s restrictive “zero-COVID” policies are in the news to start the trading week, but shares of Chinese electric vehicle (EV) maker Nio (NYSE: NIO) aren’t being hit. The stock, in fact, jumped as much as 4.6% Monday morning. As of 12:05 p.m. ET, the stock was still higher by 1.9%.

So what

The reason is partially due to the nearly 50% drop Nio shares have already taken in the past three months, as well as where China’s COVID-19 policies might go from here. But it also may be related to a new analyst downgrade of a Chinese peer that pointed to competition from Nio and others.

Front view of blue Nio ET7 on the road.

Image source: Nio.

Now what

Nio and other automakers in China have already been impacted by lockdowns the Chinese government has enforced to try and minimize the spread of COVID-19. Over the weekend, protests against those policies were reported in several areas of the country. Investors don’t yet know how officials will react, but Nio stock has already plunged in recent months. That means more restrictive policies and resulting impacts on production and demand may already be built into the share price. And if the government pivots its approach to allow more freedom for citizens, it could give Nio and other EV stocks upside.

One analyst also noted the competition from Nio and others in downgrading the stock of competitor XPeng today. Jefferies analyst Johnson Wan downgraded that stock to hold from buy today, citing “intensified competition” in a report shared by Barron’s.

That competition also includes automakers other than Nio, and it is something Nio itself has to contend with. But with its shares down to their lowest level in more than two years, some investors likely feel there is still more upside from here.

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Howard Smith has positions in Nio Inc. and XPeng Inc. The Motley Fool has positions in and recommends Jefferies Financial Group Inc. and Nio Inc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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