The Chinese EV maker Nio (NIO) is set to report its Q4 results tomorrow. Following a 92% slide since its peak in January 2021, the stock has plunged a further 27% over the last twelve months. The company has been struggling to profitably scale its vehicle deliveries, burning cash along the way and conducting several equity offerings, diluting existing shareholders. This explains why the share price is now closer to penny stock levels.
For these reasons, I’m taking a neutral stance on Nio shares ahead of its earnings report. Although the company has a history of missing earnings expectations, its growth story still hinges on its ability to scale production more effectively. Positive free cash flow and effective working capital management are essential for Nio to reach its goal of breakeven by 2026. While this still feels more like a “show-me” story, I prefer avoiding Nio’s shares in favor of better-value alternatives.
Nio’s Path to Breakeven and Cash Flow Positive
In the previous quarter, Nio’s CEO, William Li, told investors during the earnings call that he expects the company to break even on a full-year basis in 2026—not just for a single quarter. This assumes that 2025 continues the trend of narrowing losses, driven by rising shipments and, more importantly, continued spending cuts.
If this happens, it would be a major turning point in the Chinese EV maker’s investment thesis. The company has spent years posting massive bottom-line losses, so much so that, after multiple capital raises, Nio’s market value has plunged from $75 billion at the peak of the EV hype in 2021 to just under $9 billion today.
But even more important than reaching breakeven is becoming cash flow positive. The key difference between cash flow and profit lies in non-cash expenses—especially depreciation, which is a major factor for Nio’s business. That’s why looking at cash flows is crucial for the Chinese EV maker.
If Nio turns cash flow positive, it will reduce the need for further capital raises and, in turn, limit stock dilution—which is typically bad news for share prices. In Q3, Nio actually achieved positive free cash flow. However, it’s worth noting that this was partly due to a $370 million decline in working capital, meaning the company now has less short-term liquidity and fewer assets available to cover its short-term liabilities.
That said, investors were relieved to hear management confirm that Nio has no immediate plans to raise capital. This is significant, especially considering what happened to Nikola, another EV player who aggressively diluted shareholders before ultimately filing for Chapter 11.
Nio’s European Struggles and Hope in Low-Cost Brands
Given the poor performance of Nio’s shares over the past few years, it’s no surprise that the brand’s expansion into the European market has been underwhelming—especially considering the high expectations investors once had. As management mentioned in the last earnings call, amidst rising tariffs on Chinese vehicles in Europe, Nio’s pricing is on par with Porsche. And frankly, if you compare Nio to Porsche, I would bet most European buyers would stick with the German brand.
In FY2025, Nio’s big hope for growth lies in its low-cost brands, Onvo and Firefly, expanding into more countries and regions. The company has set an ambitious goal to double its 2024 deliveries, which came in at 221,970 units. The real question, though, is whether Onvo and Firefly will gain traction in international markets—or if, two years from now, investors will hear the same story from management that they did with the core Nio brand.
That said, market forecasts for Nio’s revenue remain strong. Analysts expect the company to generate $9.39 billion in revenue for FY2024 and grow to $13.4 billion in FY2025—a robust 21.5% and 42.7% year-over-year increase, respectively. On the bottom line, analysts remain skeptical about Nio’s bold plan to break even by 2026, with current estimates still pointing to a $0.66 per-share loss that year. However, even that would represent an impressive EPS CAGR of around 30%.
What to Expect from NIO’s Q4 Earnings
First, given NIO’s poor earnings track record, investors can probably expect another quarter in which the company misses Wall Street’s estimates. Over the last ten quarters, NIO has beaten EPS expectations only twice, and revenue estimates five times.
For Q4, NIO must report a net loss of less than $0.36 per share to beat market estimates. Revenue must hit $2.7 billion, representing 16.7% year-over-year growth. Management has also indicated that free cash flow should remain positive in Q4 based on vehicle delivery volumes. But, I would like to see positive cash flow without relying on reducing working capital this time. Less capital could make Nio more vulnerable when managing costs and funding growth initiatives. Ultimately, I think this will be one of the most important things to watch in Nio’s Q4, as it could provide a clearer picture of the company’s path to breakeven by 2026.
As a high-beta stock, NIO is expected to see significant volatility post-earnings. Based on an at-the-money straddle with a $4.15 strike price and options expiring on March 14, the market is pricing in a ~10% move following the earnings report.
Is NIO a Buy, Hold, or Sell?
There’s not a lot of love for NIO on Wall Street right now. Analysts remain mostly neutral, with just one Buy rating, four Hold, and one Sell rating over the past three months. While there’s some optimism baked into the numbers, it’s far from a ringing endorsement. NIO’s average price target of $5.25 per share implies a 17% upside from the latest share price.
Nio is Only Worth Considering for Speculative Purposes
Nio stock could be a good buy opportunity for those willing to play with fire ahead of its quarterly earnings report. Although the company has often missed estimates in the past, there are signs of progress heading into 2025, particularly with free cash flow possibly showing a more consistent trend.
Even so, I’m taking a neutral stance on Nio shares. It’s hard to fully support the growth story when it relies heavily on expectations rather than consistent evidence. But at the same time, I’m not bearish enough to think the company won’t see good returns by 2026, especially with the launch of its low-priced brands, potentially upscaling the business.