Stocks in China have recently experienced a slump due to fears of increased U.S. tariffs under the incoming administration. However, NIO Inc. (NIO), one of China’s leading electric vehicle (EV) firms, posted record-breaking vehicle deliveries in December 2024. It has robust plans to release new models, explore international markets, and enhance its gross profit margins in 2025. The stock appears reasonably valued after shedding roughly 80% in the past three years. It may be an intriguing option for investors interested in exposure to the burgeoning EV market.
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Ambitious Growth Targets
NIO Inc. is a leading electric vehicle manufacturer based in China, specializing in electric SUVs and sedans. The company has distinguished itself by offering innovative power solutions, such as a home charging service, mobile charging service, and the popular battery swapping service Power Swap.
The company recently reported a significant increase in vehicle deliveries. In December 2024, 31,138 vehicles were delivered, setting a new monthly record with a 72.9% year-over-year growth. This figure includes premium smart electric vehicles under the NIO brand and family-oriented vehicles from the ONVO brand. In the fourth quarter, 72,689 cars were delivered, establishing a new quarterly high with a year-over-year increase of 45.2%. For the entire year, the company delivered a total of 221,970 vehicles, reflecting a 38.7% rise from the previous year.
Additionally, NIO unveiled its flagship, the NIO ET9, which is expected to begin deliveries in March 2025. NIO’s newest brand, Firefly, was also introduced at the same event. Firefly, a small, high-end electric car, is anticipated in April 2025.
The Chinese EV market is predicted to reach a total revenue of $419 billion by 2029, with China accounting for 45% of total vehicle sales by 2027. NIO is currently among the top 3 Chinese EV brands and plans to capitalize on this growth, expecting to deliver approximately 440,000 units in 2025, almost double the sales of 2024. This projection is aligned with the company’s ambitious expansion plan to penetrate 25 overseas markets by the end of this year.
Improving Margins
In the third quarter of 2024, vehicle sales declined slightly by 4.1% compared to the same period in 2023, even though there was a 6.5% increase from the second quarter. This resulted in a year-over-year revenue decline of 2.1%, which came in at $2.6 billion.
However, gross profit increased significantly by 31.8% from Q3 2023, as the gross margin improved to 10.7%, up from 8.0% in Q3 2023. Yet, loss from operations increased by $746.4 million, an 8.1% increase from Q3 2023. This contributed to an overall net loss of $721 million or a loss per share of $0.36.
As of the end of the quarter, cash and cash equivalents were $6.0 billion.
Management has given guidance for the fourth quarter of 2024, forecasting total revenue of $2.8 billion and $2.9 billion, reflecting a year-over-year increase of 15.0% to 19.2%.
Analysts Are Split
The stock has been on an extended downward trajectory, losing 30% in the past year. It trades near the low end of its 52-week price range of $3.61 – $7.71 and shows ongoing negative price momentum as it trades below the 20-day (4.32) and 200-day (4.81) moving averages. Its P/S ratio of 0.94 is in line with the Consumer Discretionary sector average of 0.95x.
Analysts covering the company have had widely divergent views of NIO stock. On the bullish side, Citi analyst Jeff Chung recently reiterated a Buy rating with a price target of $8.90. He cites the combination of increased incentives and the expected share price appreciation. Meanwhile, representing the bears, Goldman Sachs analyst Tina Hou recently maintained a Sell rating while lowering the price target from $3.90 to $3.50.
Nio is rated a Hold overall, based on the recent recommendations of 12 analysts. The average price target on NIO is $5.52, representing a 28.67% potential upside from current levels.
Bottom Line on NIO
Despite recent market turbulence, NIO shows promising signs of growth and potential. The company has made significant strides, with record-breaking vehicle deliveries in December 2024, and announced ambitious plans for 2025. NIO’s vision includes launching new models, expanding globally, and enhancing its gross profit margins, effectively doubling its sales compared to the prior year. However, analysts hold various opinions regarding NIO’s ability to achieve such lofty targets.
Regardless of these differing perspectives, its underlying progress cannot be overlooked. As a result, NIO represents an intriguing investment opportunity for those looking to gain exposure to the expanding EV market.
