Nio has a shot at earning 'Tesla of China' moniker after solid quarter, cash infusion, Piper Sandler says

• Electric-vehicle maker Nio "has a shot at earning the 'Tesla of China' moniker," Alexander Potter of Piper Sandler wrote in a Tuesday note.
• Piper Sandler said Nio may live up to the name following solid quarterly earnings. The firm also boosted its price target on shares to $14 from $4.
• "There is a lot of hype surrounding EV startups lately, and since none of these newly-emerging companies (except Tesla) can match NIO's track record, we think it's possible NIO deserves more airtime than it's getting," Potter wrote.
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Although Nio has already been called the "Tesla of China," it may actually have a chance at the title, according to Piper Sandler.

"With a fortified balance sheet and a well-established brand, we think NIO has a shot at earning the 'Tesla of China' moniker," Alexander Potter wrote in a Tuesday note.

The commentary on Nio came after the company reported solid quarterly earnings on Tuesday, beating Wall Street's expectations and posting a positive gross margin for the first time ever. In addition, Nio nearly tripled its quarterly vehicle sales on the year.

Shares of Nio initially spiked on the earnings beat, but then slumped as investors took profits. Piper Sandler on Tuesday boosted its price target on shares of Nio to $14 from $4, implying roughly 8% upside to where shares currently trade.

"There is a lot of hype surrounding EV startups lately, and since none of these newly-emerging companies (except Tesla) can match NIO's track record, we think it's possible NIO deserves more airtime than it's getting," Potter wrote.

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A year ago, Potter wasn't sure that Nio would stay afloat, even though the company had unique products and didn't rely too much on electric-vehicle subsidies, according to the note.

In the near to medium term, funding is no longer an issue, "because NIO subsequently raised capital in two funding rounds, including a secondary equity offering in June," said Potter. "With this key risk now addressed, we think the stock will trade more in-line with (rather than at a substantial discount to) global EV peers."

While Nio currently relies on partners for core capabilities such as self-driving systems and batteries, the company may attempt to take on these things internally over time, the note said. And while its recent infusion of capital "makes for an atypical ownership structure," according to Potter, "cash is cash."

Nio has gained roughly 222% year-to-date.