NIO NIO shares have soared 13.5% over the past month, outperforming the Zacks Auto, Tires and Trucks sector’s loss of 16.2% and the Zacks Automotive – Foreign industry’s rise of 2.1%. 

However, NIO has lagged its competitors like XPeng XPEV and Li Auto LI in the same time frame. XPEV and LI shares have appreciated 50.3% and 38% over the past month.

NIO has been benefiting from a robust vehicle portfolio that includes the ES6, ET5T, ES8, EC6, EL7, ET5, EC7 and ET7 models, which are aiding the company’s delivery growth. NIO achieved a record with 221,970 deliveries in 2024, an increase of 38.7% on a year-over-year basis.

One-Month Performance

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NIO has successfully launched the ONVO L60, marking its entry into the broader mainstream family market. It has become the first brand to introduce vision-based navigation-guided smart driving on urban roads.

The NIO ET9, the company’s flagship executive model, is expected to start deliveries in March 2025, aimed at reinforcing NIO’s premium brand image. Its latest Firefly brand is targeting the boutique compact car market, diversifying its product lineup.  

NIO is also rapidly expanding its charging and power swap network. It has 2,737 power swap stations worldwide, including 887 on highways, with 58 million swaps completed. It has more than 24,000 chargers and destination chargers in operation.

With 398 service centers and 65 delivery centers globally, NIO has a strong after-sales and service network. Its ONVO brand has 191 stores across China, expanding consumer touchpoints. Furthermore, NIO plans to accelerate its international market entry in 2025 with NIO, ONVO and Firefly products. 

NIO shares are currently trading above the 50-day and 200-day moving averages, indicating a bullish trend.

NIO Trades Above 50-Day & 200-Day SMAs

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However, the NIO stock is currently overvalued, as suggested by its Value Score of C. In terms of the price/book ratio, NIO is currently trading at 6.09, higher than its median of 4.37 and the industry’s 0.96.

Price/Book Ratio

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NIO is also suffering from several challenges that are hindering its growth trajectory. The company’s vehicle sales are expected to be hurt in 2025, as the global auto sector is on a decline. Additionally, macroeconomic uncertainties like tariff hikes and policy changes with regard to EVs can also pose headwinds to the company’s vehicle sales.

NIO has also been facing the issue of rising costs, which is limiting its profitability. In the third quarter of 2024, SG&A expenses increased 13.8% on a year-over-year basis, driven by higher personnel costs and marketing expenses for new product launches. A massive RMB3.3 million was spent on R&D, a 9.2% year-over-year increase, pressuring profitability. This trend is expected to continue through 2025. NIO’s international expansion is still in its early stages, with limited market penetration outside China. The high costs associated with global expansion are also expected to impact near-term profits.

Strong competition from Tesla, BYD, XPeng and Li Auto are also a cause of concern for NIO. Managing costs, improving profitability and navigating the fierce market competition are critical for NIO to sustain its growth.

The Zacks Consensus Estimate for NIO’s 2025 loss is currently pegged at $1.03 per share and has widened by 2 cents over the past 30 days. However, it indicates growth of 28.25% on a year-over-year basis.

NIO beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters and missed twice, the average surprise being 2.31%.

Conclusion

NIO shows strong growth potential with expanding deliveries, new product launches and a robust charging network. Its Growth Score of A makes the stock attractive for growth-oriented investors.

However, high valuation, rising costs and intense market competition make it warrant a more cautious approach.

NIO currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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