The place Will Nio Inventory Be in 1 Yr?

Nio (NIO -0.28%), a number one producer of electrical automobiles (EVs) in China, posted its first-quarter earnings report on June 3. Its income rose 21.5% yr over yr to 12.03 billion yuan ($1.66 billion), however its web loss widened from 5.18 billion yuan ($720 million) to six.75 billion yuan ($930 million). It missed analysts’ expectations on each its prime and backside strains.

Nio’s inventory rose barely after that report, but it surely’s nonetheless down about 27% over the previous 12 months. Let’s examine if it can lastly stabilize and bounce again over the next yr.

Picture supply: Nio.

Is Nio’s enterprise stabilizing?

Nio’s core model sells a variety of electrical sedans and SUVs. It additionally not too long ago launched two sub-brands over the previous yr: its Onvo model for cheaper and family-oriented SUVs and its Firefly model of compact automobiles. It differentiates itself from its opponents with batteries which could be shortly swapped out at its swapping stations. It is also increasing in Europe to diversify its enterprise away from China.

The Chinese language EV maker delivered its first automobiles in 2018. Its annual deliveries soared 81% in 2019, 113% in 2020, and 109% in 2021. Its annual car margin additionally improved from unfavourable 9.9% in 2019 to a document excessive of constructive 20.1% in 2021 because it scaled up its enterprise and ramped up its manufacturing.

Nonetheless, Nio’s deliveries solely rose 34% in 2022 and 31% in 2023, whereas its car margin shrank to 9.5% in 2023. It primarily attributed its slowdown to powerful competitors, a persistent pricing conflict in China’s EV market, macro headwinds, and opposed climate situations.

However in 2024, its deliveries rose 39% to 221,970 automobiles as its car margin expanded to 12.3%. On a quarterly foundation, its deliveries grew quickly once more all through the whole yr as its car margins rose sequentially:

Knowledge supply: Nio. YOY = Yr-over-year.

What are Nio’s catalysts and challenges?

Nio’s development accelerated once more because it delivered extra premium ET-series sedans and Onvo SUVs in China, grew its home market share, and continued its growth throughout Europe. Nio additionally additional differentiated itself from China’s different EV makers by creating its personal intelligent-driving chips and SkyOS car working system. Its margins stabilized because it bought a better mixture of higher-end sedans, lowered its manufacturing prices, and streamlined its bills.

Nonetheless, Nio nonetheless faces stress from greater opponents like BYD, which delivered 4.27 million automobiles in 2024 (together with 1.76 million battery-powered EVs), and Tesla, which delivered 657,102 automobiles in China through the yr. Each of these opponents have been aggressively lowering their costs.

That competitors, together with the growth of its new Onvo and Firefly sub-brands, might compress Nio’s car margins and stop it from ever breaking even. Its ongoing investments in its batteries and battery-swapping networks might exacerbate that stress.

On the intense aspect, the European Union is reportedly contemplating changing its tariffs on Chinese language EVs with minimal worth limits. That change might make it simpler for Nio to remain aggressive in Europe. It is also in talks to promote a controlling stake of its battery division, Nio Energy, to the Chinese language battery maker CATL. That transfer would streamline its enterprise and cut back its working bills, but it surely in all probability will not totally offset its different hovering bills.

The place will Nio’s inventory be in a single yr?

For now, analysts anticipate Nio’s income to rise 34% in 2025 and 33% in 2026. These are excessive development charges for a inventory which trades at simply 0.7 occasions this yr’s gross sales. By comparability, BYD and Tesla commerce at 1.1 and 9.4 occasions this yr’s gross sales, respectively.

Assuming Nio meets analysts’ top-line estimates and trades at a extra beneficiant two-times ahead gross sales, its inventory might doubtlessly surge about 500% by 2026 Q1. If the commerce tensions between the U.S. and China lastly wane, Nio might ship even greater positive factors because it’s valued extra carefully to Tesla and different higher-growth automakers. Nio continues to be a speculative inventory, but it surely might have extra upside potential than draw back potential at its present ranges.