One has to be looking on the bright side of life to be bullish about Nio (NYSE:NIO). The Chinese EV maker has missed revenues estimates, remains unprofitable, and will now be forced to deal with the potential U.S.-China trade tensions many are expecting from the incoming Trump administration.
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All told, shares are down almost 50% for the year. And yet, improving margins and expanding product lines could signal that better days are ahead. As the sun sets on 2024, could Nio’s fortunes be on the verge of improving as well?
One investor, known by the pseudonym Bluesea Research, thinks that the coming year is looking promising for the embattled company.
“NIO is still showing big losses, but this could change in 2025 as the margins improve, and the company launches new models which should increase the deliveries and revenue base,” writes the investor.
While acknowledging the revenue challenges, Bluesea points to improving metrics as a positive sign. The investor notes that Nio was able to increase gross margins by 2.7% year-over-year, while simultaneously growing deliveries by 28.9% year-over-year.
The improved gross margins are particularly noteworthy considering the existence of the intense competition in China. “The only way NIO’s management could have pulled it off is through strong cost optimization,” writes Bluesea.
Going forward, the investor highlights Nio’s Wall Street’s optimistic views of revenue projections of $13.5 billion for the fiscal year ending in December 2025. Hitting this mark would translate into 43.6% year-over-year growth, demonstrating that Wall Street is optimistic about NIO’s ability to build on its existing premium sales while expanding with its more affordable models.
When it comes to the commercial relations between the U.S. and China, the investor makes the argument that the hawkish stance of the Trump administration could actually calm trade tensions.
“I believe the ultra-hawkish foreign policy position of the next Trump administration could be a big tailwind for NIO and other Chinese stocks,” posits the investor. Bluesea explains that Trump’s aggressive policies will remove uncertainties, while bilateral visits during the once and future president’s first term helped reduce tensions as well.
In addition, the flip side of falling share prices is that the stock has become much more attractive. With a PS ratio of 1.0, Nio is currently trading at a “rock-bottom price.” In comparison, competitors Tesla and Lucid are trading at PS ratios of 16.5 and 8.0, respectively, Bluesea writes.
“NIO stock can be a good option for investors looking to enter the EV sector,” concludes the investor, who is assigning a Buy rating for NIO. (To watch Bluesea Research’s track record, click here)
Wall Street seems to agree that 2025 will be a marked improvement upon the current year. With 6 Buy, 4 Hold, and 2 Sell ratings, NIO enjoys a Moderate Buy consensus rating. Its 12-month price target of $5.99 implies gains of some 32%. (See NIO stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
