After losing about 70% and 9% of its value in 2022 and 2023, respectively, shares of the Chinese EV (electric vehicle) maker Nio (NYSE:NIO) are down about 33% year-to-date. As Nio stock continues to slide, losing substantial value, it made us wonder whether Nio could hit penny-stock (learn more about penny stocks here) levels from here. According to J.P. Morgan analyst Nick Lai, Nio could become a penny stock.
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On March 6, Lai reiterated a Sell rating on Nio stock following the company’s Q4 results announcement. Lai revised Nio’s price target lower to $4.80 from $5, citing the Q4 earnings shortfall and a lower-than-expected Q1 delivery projection as a sign of caution. Notably, Nio’s loss per share of $0.39 was higher than the Street’s forecast of a loss per share of $0.33.
Similarly, other analysts, including Tim Hsiao from Morgan Stanley, Ming-Hsun Lee from Bank of America Securities, Jiong Shao from Barclays, Eunice Lee from Bernstein, and Ding Luo from CLSA, also adjusted their price targets downward for Nio stock following the company’s Q4 report.
The Road Ahead for Nio
While Nio stock has underperformed the broader equity market, heightened competition, a price war to capture higher market share, and macro headwinds could continue to pose challenges. This implies that Nio stock might not recover quickly over the next 12 months.
Nonetheless, the start of the delivery of its 2024 facelift models, its focus on improving system capabilities and optimizing costs, and mass production will likely cushion its margins.
Is NIO a Buy or Sell?
Wall Street analysts are cautiously optimistic about NIO stock due to the competitive headwinds and overall softness in the demand environment.
Nio stock has six Buy, six Hold, and one Sell recommendations for a Moderate Buy consensus rating. Analysts’ average price target on NIO stock is $7.09, implying an upside potential of 16.23% from current levels.
Bottom Line
Nio stock has underperformed the market averages over the past couple of years and continues to face headwinds in the short term. While NIO stock carries a Moderate Buy consensus rating, investors can leverage TipRanks’ penny stock screener to find top-rated penny stocks.
