Shares of NIO Inc. (NIO) are on the rise on Wednesday after JPMorgan analyst Nick Lai upgraded the stock to Overweight on his expectation that the company will be a long-term winner in the premium electric vehicle space among Chinese brands. Despite NIO's year-to-date rally, the analyst believes its valuation suggests "meaningful upside in the long-term".

LONG-TERM WINNER: JPMorgan analyst Nick Lai upgraded NIO Inc. to Overweight from Neutral with a price target of $40, up from $14. China's new energy vehicle penetration is set to accelerate from here and quadruple by 2025, Lai told investors in a research note. In China's smart electric vehicle market, the analyst expects NIO to be a long-term winner in the premium space among Chinese brands versus Xpeng (XPEV) leading the mass market. Tesla (TSLA) is driving "a rising tide lifts all boats" phenomenon, said Lai, who believes the China market is not "winner takes all." Despite NIO's year-to-date rally, the analyst believes its valuation suggests a "meaningful upside in the long-term."

Lai acknowledged he missed the stock's big rally year-to-date. Nonetheless, he points out that NIO is expected to dominate about 30% of the premium passenger EV market, reaching 334,000 units by 2025, and sees the third-quarter results in mid-November as the next event. The analyst expects solid backlog orders of the newly launched EC6 crossover, he added.

THIRD QUARTER DELIVERIES: Earlier this month, NIO Inc. reported September and third-quarter delivery results. NIO said it delivered 4,708 vehicles in September, a new monthly record representing a 133.2% year-over-year growth. The deliveries consisted of 3,210 ES6s, the company's 5-seater smart electric SUV, 1,482 ES8s, the company's 6-seater and 7-seater smart electric SUV, and 16 EC6s, the company's 5-seater electric coupe SUV. NIO also said it delivered 12,206 vehicles in the third quarter, representing an increase of 154.3% year-over-year and exceeding the higher end of the company's quarterly guidance. As of September 30, cumulative deliveries of the ES8, ES6 and EC6 reached 58,288 vehicles, of which 26,375 were delivered in 2020.

WHAT'S NOTABLE: China's SAIC Motor has plans to launch a high-end new-energy vehicle brand in a move to challenge Tesla in one of the world's biggest electric vehicle markets, Caixin's An Limin and Annek Bao reported. According to company insiders, SAIC's NEV brand will develop a completely new platform for car assembly

PRICE ACTION: In morning trading, shares of NIO have jumped almost 17% to $25.21.