Is there any growth potential left in NIO stock?

Jon Smith wonders whether the best days for NIO stock are well in the past, or if there might still be a chance for explosive growth.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.

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.

NIO (NYSE:NIO) stock’s been on a downward spiral since the start of 2021. The electric vehicle (EV) manufacturer was once lauded to be the next big thing but has experienced struggles along the way, causing some investors to throw in the towel on this share. So is there any growth potential left that makes it worthy of consideration?

Why the battery’s low

First, it’s important to understand why the share price has performed poorly despite operating in a growth sector. The 28% fall over the past year can be put down to three main reasons. To begin with, competition in the EV space has ramped up. On top of other specialist EV firms like Tesla, NIO’s been competing with more traditional car makers pivoting to offer customers a hybrid of full EV options.

Another influence has been a poor financial performance. Back in November, the quarterly results showed a net loss of $710m, up from the loss of $639m from the year prior. This was also worse than analysts’ expectations. If a business can’t make a profit for a continued period of time, it doesn’t bode well.

Should you invest £1,000 in NIO right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if NIO made the list?

See the 6 stocks

Finally, NIO’s a Chinese company, headquartered out of Shanghai. The broader problems with the Chinese economy has hindered progress, with some investors steering clear of the stock as they saw it as a bellwether for the economy.

Created with Highcharts 11.4.3Nio PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Optimistic outlook

But there could be significant growth potential left in NIO shares. For a start, production numbers are increasing. At the start of this month, the company released more information on delivery numbers for last year.

For December, 31,138 vehicles were delivered, a jump of 72.9% versus the same month in 2023. When we consider the year in total, 221,970 vehicles were delivered, an increase of 38.7% from 2023. This shows demand’s increasing, pushing revenue higher.

This could indicate that if the firm can keep a lid on costs going forward, making an annual profit might not be too far away.

Another factor’s the low share price. At $4.36, it’s close to the 52-week lows of $3.61. Below that and I have to look back to 2020 to find it at a similar level! On the other hand, it traded at $67 in 2021. So based on past performance, there’s an argument to be made that there’s certainly growth potential there.

The bottom line

Of course, past performance doesn’t indicate future returns. But when I consider that the company’s growing, I think it’s only a matter of time before financial results improve. It’s true that the EV space is competitive, but based on the potential market size, there’s plenty of money to go around. As a result, I think NIO could be a smart buy for investors to consider at the moment.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Jon Smith owns shares in Tesla. The Motley Fool UK has recommended Tesla. 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 US Stock

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

3 shares I’ve bought in the 2025 stock market sell-off

The stock market has experienced a lot of turbulence in recent weeks. Edward Sheldon has been taking advantage and buying…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

As the S&P 500 struggles to recover, here’s what Warren Buffett’s doing

The S&P 500 is fighting to regain its February highs amid ongoing trade tariff uncertainty. Our writer looks to the…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Stock-market crash: the meltdown of the Magnificent 7

Just before Christmas, these Magnificent Seven stocks were riding high. But after the worst quarter for US stocks since autumn…

Read more »