NIO Inc. (NYSE: NIO) shares saw their price target trimmed by BofA Securities analyst Ming Hsun Lee from $5.00 to $4.90, while the firm maintained a Neutral rating on the stock. The downgrade reflects margin pressures and increased operational expenses, despite the company’s bullish vehicle delivery and revenue projections.
Currently trading at $4.51, NIO is considered undervalued by InvestingPro, with analyst price targets ranging widely from $3.90 to $12.49.
Optimistic Delivery and Revenue Forecast
NIO’s management has provided upbeat guidance for vehicle deliveries and revenue growth in 2025. The company expects to deliver between 41,000 to 43,000 vehicles in the first quarter of 2025—a 36% to 43% increase compared to the same period last year.
Revenue projections for the quarter range from 12.4 billion RMB to 12.9 billion RMB, representing 25% to 30% year-over-year growth. This outlook builds on NIO’s 15.67% revenue growth over the last twelve months.
Profitability Concerns Weigh on Valuation
While vehicle delivery growth is encouraging, profitability challenges remain a key concern. BofA Securities revised its gross profit margin (GPM) estimates downward, cutting 2025 margins by 0.2 percentage points and 2026 by 0.6 percentage points.
Currently, NIO’s gross margin stands at 8.65%, highlighting the company’s struggles with margin expansion. Additionally, BofA raised its projection for NIO’s non-GAAP net loss in 2025 by 3%, although it lowered the loss estimate for 2026 by 3%, signaling longer-term improvements.
Despite the projected sales growth, higher operational costs and slower margin expansion could dampen the financial upside, limiting near-term profitability.
Fourth-Quarter Earnings Miss
NIO’s fourth-quarter 2024 results fell short of expectations. The company reported RMB 19.7 billion in revenue, slightly below the RMB 20 billion consensus estimate. Earnings per share (EPS) came in at RMB (3.45), missing the expected RMB (2.59).
For the first quarter of 2025, NIO expects revenue between RMB 12.4 billion and RMB 12.9 billion, significantly below the RMB 22.5 billion consensus forecast. This indicates a 41% to 44% quarter-over-quarter decline in vehicle deliveries, raising concerns about the company’s near-term growth trajectory.
Mixed Analyst Sentiment
Despite the price target cut from BofA, Morgan Stanley remains bullish on NIO, maintaining an Overweight rating with a $5.90 price target. However, Mizuho took a more cautious stance, lowering its price target from $5.00 to $4.20, while maintaining a Neutral rating.
Technological Advancements Amid Competition
In a positive development, NIO has outpaced Tesla (NASDAQ: TSLA) in the Wards Intelligence Software-Defined Vehicle ranking, moving into second place. This underscores the company’s advances in software integration, a key differentiator in the competitive EV market.
NIO is also pushing forward with its NT 3.0 facelift and plans to launch several new models this year. These initiatives aim to boost market share and strengthen the brand’s appeal amid fierce competition from Tesla, BYD, and emerging Chinese EV makers.
