Nio (NYSE:NIO) gave investors something to cheer about today – shares shot up 8% as the buzz around its turnaround story grows louder. Driving that optimism was an upgrade from UBS analyst Paul Gong, who not only upgraded the stock from Neutral to Buy but also raised his price target from $6.20 to $8.50. The new figure implies a 21% upside from current levels. (To watch Gong’s track record, click here)
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Such a call tends to grab attention, especially when it’s backed by more than just optimism. In this case, Gong pointed to a healthier balance sheet following Nio’s recent billion-dollar raise, along with encouraging momentum from its new ES8 and L90 models. Those factors help explain why the stock’s rebound has gathered pace.
Indeed, Nio shares have been on a tear, climbing 84% over the past three months as investors grow more upbeat about the Chinese EV maker’s prospects. This marks a sharp shift in sentiment after years of hand-wringing over the company’s heavy cash burn and fierce competition in the world’s biggest EV market.
That shift lines up with what Gong calls “restored consumer confidence.” For years, buyers hesitated over Nio’s losses – more than RMB100 billion in total – but Gong argues the recent $1 billion placement, paired with improving operations, has calmed those concerns. The analyst now sees the company on track to hit non-GAAP operating profit breakeven in Q4, while new launches like the L90 and ES8 give sales momentum a solid foundation.
“The recently launched L90 and ES8 are competitive products in their category,” Gong said. “We foresee some sustained sales momentum over the next few months.”
Gong believes the ES8’s premium price tag above RMB400,000 will not only boost volumes but also lift ASPs and gross margins. That could leave Nio’s Q4 revenue about 50% higher than rival XPeng’s, despite its market cap still trailing XPeng’s by about 25%. With losses narrowing and profitability in sight, Gong thinks this valuation gap should start to close.
Still, the big question is whether Nio can actually reach non-GAAP EBIT breakeven in Q4. The simple answer, says Gong, is “yes.” The analyst anticipates monthly deliveries of 50,000 units in the quarter, driven by strong ES8 and L90 demand, the timely expansion of capacity, and “favourable seasonality towards year-end.” With rapid volume growth and an improved product mix, Gong sees vehicle margins hitting 16.5% in the quarter. Combined with cost-saving and efficiency measures implemented since 2Q25, the analyst forecasts non-GAAP R&D expenses will fall to RMB2 billion and the SG&A ratio will drop below 10%, allowing Nio to achieve non-GAAP EBIT breakeven in Q4. Gong also anticipates Nio will maintain a net cash position of RMB21 billion by the end of 2025 and reach free cash flow breakeven in 2026.
Wall Street is not unanimous, though. 7 other analysts also rate Nio shares a Buy, while 5 sit on Hold and 1 recommends Sell. That mix leaves the stock with a Moderate Buy consensus. But with an average price target of $6.43, the shares have already run about 7% past where the Street as a whole thinks they should be. (See Nio stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.