The year 2024 has been a dismal one for Chinese electric vehicle (EV) maker Nio Inc. (NIO), with its stock plunging about 51% year-to-date. Macro pressures in China, price wars triggered by intense competition, and concerns over the company’s profitability weighed on Nio stock. Wall Street is cautiously optimistic about Nio, with analysts’ average price target indicating a rebound in the stock from current levels based on optimism about the launch of the company’s mass models and the possibility of improvement in financials.
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Nio’s Recent Performance
Nio’s third-quarter performance was a mixed bag. The company’s revenue declined 2.1% year-over-year to RMB 18.7 billion ($2.7 billion) but was up 7% sequentially. The year-over-year fall in the topline reflected lower average selling prices, which more than offset a 12% rise in Q3 deliveries to 61,855 units.
On the positive side, Nio’s gross margin expanded to 10.7% from 8% in Q3 2024, driven by the company’s cost optimization efforts and higher sales volume. Moreover, the company’s free cash flow turned positive in the third quarter of 2024.
Looking ahead, Nio expects Q4 deliveries to grow in the range of 43.9% to 49.9% year-over-year and revenue growth between 15.0% and 19.2%. The company aims to double its sales in 2025, with estimated sales of around 240,000 from the models under its Onvo sub-brand. Additionally, it is optimistic about its Firefly sub-brand contributing to the topline growth when its deliveries commence in the first half of 2025. The company is also upbeat about its ET9 model under the Nio brand.
Analysts Are Divided on Nio Stock
Amid the ongoing challenges, Wall Street is divided on Nio stock. Earlier this month, Citi analyst Jeff Chung reiterated a Buy rating on Nio stock with a price target of $8.9 (nearly 99% upside potential). The analyst noted that management is targeting group-level breakeven in 2026, driven by Nio brand’s monthly sales of 25,000 units with an average selling price (ASP) of RMB 350,000 and a gross margin of 20% and ONVO brand’s monthly sales of 35,000 to 45,000 units with an ASP of RMB 220,000 -250,000 and a gross margin of 15%.
Chung added that Nio’s breakeven target is also based on limiting its research & development (R&D) expense growth to less than 10% and controlling selling, general, and administrative expenses.
Meanwhile, in a research note on Chinese autos, Bernstein analyst Eunice Lee reiterated a Hold rating on NIO stock. Based on first-time auto insurance volumes, the analyst noted that November retail auto volumes in China grew 23.1% year-over-year, with mass-market brand sales seeing a significant surge of 28.7%. Despite encouraging month-to-date December sales, Lee expects China’s overall auto demand to decline 5% in 2025 due to the potential end of supportive policies and challenging macro conditions.
Is Nio a Buy, Sell, or Hold?
Overall, Nio scores a Moderate Buy consensus rating on TipRanks based on six Buys, four Holds, and two Sells. The average Nio stock price target of $5.99 implies 34% upside potential.
Conclusion
While Nio bulls are optimistic about the company’s future prospects, other analysts are concerned about the fact that it remains unprofitable. Moreover, macro uncertainty in China and intense competition in the EV space continue to be concerning. Nonetheless, the Street’s average price target indicates a rebound in the stock from current levels based on expectations of improvement in financials and optimism about new models.
