Nio (NIO +3.35%) has been a wildly volatile stock since its IPO in 2018. The Chinese maker of electric vehicles went public at $6.26 per share, and it skyrocketed tenfold to a record high of $62.84 during the buying frenzy in meme stocks in February 2021.
However, as of this writing, Nio's stock trades at about $5 per share. The bulls retreated as its deliveries cooled off, its margins shrank, and it racked up steep losses. Could scooping up some shares of this unloved stock below its IPO price help set you up for life?
Nio's Eve concept car. Image source: Nio.
Why did Nio take a round trip back to its IPO price?
Nio produces a wide range of electric sedans and SUVs. It differentiates itself from its competitors with its swappable batteries, which can be quickly replaced at its own battery swapping stations as a faster alternative to traditional chargers.
Nio delivered its first vehicles in 2018, and its annual deliveries surged nearly 11-fold from 2019 to 2024. But after more than doubling its annual deliveries in 2020 and 2021, its deliveries decelerated significantly in 2022 and 2023 as it struggled with supply chain constraints, tougher competition, and China's economic slowdown.
|
Metric |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
|---|---|---|---|---|---|---|
|
Deliveries |
20,565 |
43,728 |
91,429 |
122,486 |
160,038 |
221,970 |
|
Growth (YOY) |
81% |
113% |
109% |
34% |
31% |
39% |
Data source: Nio. YOY = Year over year.
Nio's annual vehicle margin, which had reached a record high of 20.2% in 2021, also shrank to 13.7% in 2022 and 9.5% in 2023 as its pricing power waned. Its annual net loss more than quadrupled from 2021 to 2023. All of those challenges -- along with trade tensions and rising interest rates -- drove away bulls.
NYSE: NIO
Key Data Points
What's next for Nio?
After two years of slowing growth, Nio's growth in deliveries accelerated again in 2024. Its business stabilized as it grew its market share in China and expanded in Europe.
That recovery was driven by its stable sales of its ET sedans, ES SUVs, and EC crossovers, as well as the launch of its lower-end Onvo L60, which resembles Tesla's (TSLA +0.53%) Model Y but starts at just 149,900 yuan ($20,646). It also continues to expand across Europe even as it faces higher tariffs on Chinese-made EVs across the region.
But despite that pressure, Nio's quarterly vehicle margins stabilized in 2024, growing from 9.2% in the first quarter to 12.2% in the second quarter and 13.1% in the third quarter. It expects that figure to rise again to 15% when it posts its fourth-quarter earnings report on March 21. It attributes that recovery to its lower material costs and its rising sales of premium vehicles (including its ET7 Executive Edition sedan) in China, which largely offset its lower average selling prices.
Last December, Nio launched the Firefly, a compact electric hatchback that targets buyers of smaller vehicles like BMW's (BAMXF 1.10%) Mini, with a starting price of just 148,800 yuan ($20,495). It also intends to launch the Firefly in Europe this year, and it could localize some of its production to the EU in the future to counter tariffs.
Could Nio's stock bounce back?
Assuming Nio's deliveries and vehicle margins continue rising, analysts expect its revenue to grow at a compound annual growth rate (CAGR) of 30% from 2023 to 2026 as it roughly halves its annual net loss. Nio won't turn a profit anytime soon, but it's still subsidized by the Chinese government and had $6 billion in cash and equivalents at the end of its latest quarter.
With an enterprise value of 76.9 billion yuan ($10.9 billion), Nio still trades at less than 1 times its projected sales of 97.6 billion yuan ($13.5 billion) for 2025. By comparison, Tesla trades at 6 times its projected sales for 2025.
Nio's valuations are likely being squeezed by persistent tensions between the U.S. and China, threats of higher tariffs, and concerns about the cooling EV market. But if those pressures ease as Nio scales up its business, it could be revalued as a growth stock again and deliver big multibagger gains from its current prices.
So, while it's still too early to tell if Nio could "set you up for life" over the long term -- an unlikely feat for any one stock -- it could be a high-risk, high-reward play for bold investors. Nio hasn't proved that its business model is sustainable or that it can generate consistent profits, but it's an attractive stock to buy if you expect the trade tensions to wane and the EV market to warm up.
