These are tough times for the EV industry. While it is still expected that over the long-term, electric cars will be the norm, the rate of adoption has been slower than expected, with softening demand and increasing competition making it a field that is currently difficult to operate in.
For evidence of the struggle, just ask Nio (NYSE:NIO) investors. Beset by a lack of meaningful near-term catalysts in the product line compared to peers and dealing with vicious price wars, sentiment around the Chinese EV maker has been particularly low, with the shares having retreated by 46% year-to-date.
The latest assessment from Mizuho analyst Vijay Rakesh will do little to improve the mood.
“We see NIO as a technology leader in the China EV space with a strong premium SUV/Sedan portfolio, solid ADAS roadmap with NOP and proprietary BaaS all key differentiators in the competitive China market,” said Rakesh, who ranks in the top 1% of Street stock pros. “However, we see increasing competition from multiple brands along with high pricing providing headwinds to broader NIO adoption among consumers in a slowing BEV market.”
After the March quarter was guided down 36% sequentially to 32,000 units, Rakesh has become more cautious regrading what lies ahead and has reduced his respective F24E/F25E delivery estimates to 183,000/274,000 vs. the prior 231,000/313,000. The consensus estimates stand at 204,000/278,000.
That new forecast for 2025 factors in ~57,000 vehicle sales from its mass-market brand “Le Dao,” which the company should unveil in May with production kicking off in Q4, though Rakesh thinks that with lower GMs (gross margins), it “could be a drag” on GM targets of 20%+.
Rakesh also sees the possibility of “near-term margin pressure” in the March quarter due to Nio’s intention to provide incentives to clear existing inventory before the launch of the 2024 models. Additionally, the 5-star analyst foresees difficulties in meeting the delivery targets for the quarter, with units currently “tracking modestly shy” of ~32,000 deliveries.
As such, Rakesh has downgraded Nio stock from Buy to Neutral and lowered his price target from $15 to $5.50. The new figure represents growth of 12% from current levels. (To watch Rakesh’s track record, click here)
7 other analysts join Rakesh on the fence with Hold ratings and with an additional 7 Buys and 1 Sell, NIO shares claim a Moderate Buy consensus rating. Overall, the $6.99 average target is an optimistic one and suggests the shares will post growth of 42.5% in the year ahead. (See Nio stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
