When an influential analyst raises a rating from Sell to Hold, that typically goes along with a modest price target increase. That’s why UBS analyst Paul Gong’s recent call on Chinese electric vehicle maker Nio Ltd. (NYSE: NIO) made so much noise on Tuesday.

Gong raised his rating on Nio shares from Sell to Neutral and his price target from $1 to $16. Nio’s shares, which closed at $14.97 on Monday, added nearly $3.00 on Tuesday and added nearly another $1.00 in the first half-hour of Wednesday trading.

Stocks in electric vehicle (EV) companies appear to be trading in a parallel universe. The poster child, of course, is Tesla Inc. (NASDAQ: TSLA), which has added about $1,800 (876%) to its share price in just the past 12 months. Nio has added more than 500% in the same period.

Gong commented to Barron’s that Nio’s fundamentals have improved, “but what’s priced in?”

In late April, Nio announced an investment of RMB7 billion ($990 million) from a group of investors including the city and provincial government entities in Nio China, a new entity that will be majority-owned by Nio, with the other investors owning less than a quarter of the shares.

In addition to a fresh infusion of capital, returning interest in EVs in the Chinese market is also priced into Gong’s new rating. He is not unaware that valuations for Nio and Li Auto Inc. (NASDAQ: LI) are “elevated” with “limited visibility on growth, execution and competition” still weighing on UBS’s view of Nio.

Another Chinese EV maker, Guangzhou-based Xpeng, is expected to price a U.S. initial public offering later Wednesday. Li’s share price has risen by about 19% since its July 30 IPO.

Xpeng’s 85 million American depositary shares (ADSs) will begin trading Thursday on the New York Stock Exchange under the ticker symbol XPEV. The expected price range is $11 to $13 per ADS, and the company hopes to raise around $1 billion. Each ADS is equal to two ordinary shares.

It’s easy and reasonable to conclude that these Chinese EV makers (and recently public U.S. electric truck makers like Nikola and Workhorse) are surfing the finance wave blown up by Tesla. But is it just a wave or the spinning up of a sea change in the automobile world? No one really knows, but there is no shortage of speculation.

In the meantime, EVs sales are ramping. Morgan Stanley analysts said earlier this year that global sales of EVs will comprise 75% of all new vehicle sales by 2040, up from just 2.6% in 2019. The recent slowing of growth in EV sales reflects an overall decline in new car sales. New vehicle sales dropped by 9% last year, while EV sales growth dropped from an annual rate of 65% between 2017 and 2018 to 9% between 2018 and 2019, according to a report from McKinsey. But EV sales were growing while the rest of the industry was shrinking.

While valuations of EV makers may be sky-high (and rising) right now, there do appear to be enough fundamentals to justify at least a portion of the high stock prices. And with Tesla’s coming Battery Day presentation due next month, investor appetite for EV stocks may continue to be insatiable for a while longer.

Nio added about 5% to its share price early Wednesday to trade at $18.72, after posting a new high of $19.85. The stock’s consensus price target is $12.24.

Tesla added more than 4% to trade at $2,112.00, in a 52-week range of $212.31 to $2,129.00 and with a consensus price target of $1,340.18.

Li Auto stock added about 6.7%, trading at around $19.45, after setting a new post-IPO high of $20.69. The price target is $19.77.

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