Is NIO stock the bargain of the century?

NIO stock’s down 25.5% over 12 months and around 90% from its highs. Dr James Fox wonders if we’re looking at a bargain or a value trap.

| More on:
Investor looking at stock graph on a tablet with their finger hovering over the Buy button

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’ve previously bought and sold NIO (NYSE:NIO) stock, but I’m less tempted to buy it now. NIO, as a company, had huge promise, but it’s failed to deliver over the past 24 months. Let’s take a closer look.


The Chinese electric vehicle (EV) manufacturer delivered 18,012 vehicles in December, marking the third-highest monthly delivery on record, following July’s 20,462 and August’s 19,329.

This reflected a 13.9% increase from the 15,815 vehicles delivered in the same period in 2022 and a 12.9% increase from the 15,959 delivered in November. While this may sound like impressive growth, it really isn’t that strong compared to its peers.

By comparison, Li Auto delivered 50,353 vehicles in December. That’s up 137.15% from 21,233 units in December 2022 and up 22.72% from 41,030 units in November. What’s more, Li Auto’s now profit-making.

While February was a slow month for all new-energy vehicle makers in China, it was particularly slow for NIO. The company delivered 8,132 vehicles in February, down 33.11% from a year earlier, and down 19.12% from January. NIO has under-delivered and underperformed.

Profitability moves further away

With deliveries failing to impress, NIO hasn’t met its financial targets and has fallen short of analysts’ expectations in each of the last four quarters. When I started following NIO, the company suggested it could break even in 2024. However, that’s now been pushed back for at least for another two years. If everything goes to plan, NIO may now turn a profit in 2027.

Can the stock recover?

NIO has $6bn in cash and cash equivalent and burnt through $600m during the last quarter. In turn, this still means NIO has more than two years’ cash left at the current burn rate.

However, there is likely to be a rise in costs over the next 12 months with the car manufacturer planning to open over 1,000 battery-swapping stations over the next year. According to the firm, each of these stations costs an estimated $420,000.

It’s also worth highlighting that NIO’s unique selling point (USP) is its battery-swapping technology. The company claims that drivers can swap empty batteries for a new one in a matter of minutes.

However, charging technology’s improving considerably, and so are batteries. Li Auto’s first EV — the MEGA — can be charged in just 12 minutes and has a claimed range of 720km.

So personally I’m a lot less convinced that NIO is part of the future of transport in China. It’s an increasingly competitive market, and the company’s USP is becoming less valuable as technology develops.

Nonetheless, I think the company has a great range of vehicles and has clearly made impressive strides in developing a strong brand. Its fans can buy a whole range of products with its logo from NIO shops.

So with the company currently trading at 24.9 times predicted earnings for 2027, I’m not sure it’s worth the risk. I certainly don’t think it’s the bargain some people are claiming it to be.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has positions in Li Auto Inc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Black man sat in front of laptop while wearing headphones
Investing Articles

Investing just £10 a day in UK stocks could bag me a passive income stream of £267 a week!

This Fool explains how investing in UK stocks rather than buying a couple of takeaway coffees a day could help…

Read more »

Investing Articles

A cheap stock to consider buying as the FTSE 100 hits all-time highs

Roland Head explains why the FTSE 100 probably isn’t expensive and highlights a cheap dividend share to consider buying today.

Read more »

Investing Articles

If I were retiring tomorrow, I’d snap up these 3 passive income stocks!

Our writer was recently asked which passive income stocks she’d be happy to buy if she were to retire tomorrow.…

Read more »

Investing Articles

As the FTSE 100 hits an all-time high, are the days of cheap shares coming to an end?

The signs suggest that confidence and optimism are finally getting the FTSE 100 back on track, as the index hits…

Read more »

Investing Articles

Which FTSE 100 stocks could benefit after the UK’s premier index reaches all-time highs?

As the FTSE 100 hit all-time highs yesterday, our writer details which stocks could be primed to climb upwards.

Read more »

Investing Articles

Down massively in 2024 so far, is there worse to come for Tesla stock?

Tesla stock has been been stuck in reverse gear. Will the latest earnings announcement see the share price continue to…

Read more »

Young Caucasian woman with pink her studying from her laptop screen
Dividend Shares

These 2 dividend stocks are getting way too cheap

Jon Smith looks at different financial metrics to prove that some dividend stocks are undervalued at the moment and could…

Read more »

Investing Articles

Is the JD Sports share price set to explode?

Christopher Ruane considers why the JD Sports share price has done little over the past five years, even though sales…

Read more »