Forecast: Nio Will Hit $25 By 2025

Chinese EV manufacturer NIO (NYSE:NIO) has been among the most volatile vehicle stocks of the past few years. Briefly rising to over $60 per share in 2021, the stock now trades at less than $10.

Even as NIO’s share price has collapsed, the company has continued to rapidly expand its sales. So how high will Nio stock go over the next few years? What is the Nio stock forecast for 2025?

NIO Deliveries Spiked Up

In 2022, NIO’s vehicle sales rose 37.2 percent, while total revenues rose 36.3 percent. Vehicle deliveries spiked in Q4, growing by 60 percent over the same quarter in the previous year. NIO has since provided a delivery update for Q1 that details 20.5 percent delivery growth in the first three months of 2023.

Despite meteoric sales growth, NIO has struggled to maintain its margins. Vehicle margins shrank from 20.1 percent in 2021 to 13.7 percent in 2022. The company’s total net margin, meanwhile, was roughly -29 percent. Gross margin also shrank from 18.9 percent to 10.4 percent.

In the next 12 months, NIO is projected to see its losses shrink from $1.36 per share to $0.47 per share. Analysts broadly expect the supply chain challenges that plagued the EV industry to continue throughout 2023.

Afterward, NIO and its competitors could have a much better chance to boost their gross margins and potentially improve their profitability.

Analysts Forecast Nio Stock Will Hit $12.29

Although opinion is divided on the stock, most analysts seem to believe that NIO has considerable room to run as its sales improve and the company moves closer to profitability. On the whole, analysts believe Nio stock will reach $12.29, about 29.7 percent above the most recent price of $9.48.

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As a company that is still losing money, NIO’s value is entirely dependent on its future ability to generate positive earnings.

Today, NIO trades at 2.26 times its sales and 4.70 times its book value. Neither of these metrics is excessive for a company with NIO’s growth potential, but investors should still be cautious. High-growth companies that have yet to turn a profit are notoriously risky and can produce considerable losses.

China Slowdown Is Gorilla In The Room

As a company primarily focused on serving the Chinese market, NIO’s biggest single risk is likely that of an economic slowdown in China.

The country substantially underperformed its self-stated growth targets in 2022, raising concerns that China’s long period of economic growth could be cooling. More recent data, however, suggest that Chinese consumers may be growing more confident as the country emerges from the effects of COVID-19 lockdowns.

NIO’s balance sheet could also present certain problems for investors. The company’s long-term debt has steadily increased over the last two years, rising 68 percent in 2021 and 16 percent in 2022.

NIO’s debt-to-equity ratio is currently 0.45, and there’s a good chance that the company will continue to use debt to fund its growth. It should be noted that NIO ended last year with over $6 billion in its cash reserve, giving it at least a decent cushion in the event of financial difficulties.

Forecast: Where Will NIO Stock Be in 2025?

With earnings uncertain, the best way to predict NIO’s stock price in the future is a function of continued sales growth.

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In the short term, it’s reasonable to suppose that NIO’s price-to-sales ratio of approximately 2 will hold as long as investors continue to perceive that positive earnings will follow.

Should NIO manages to increase its sales by 30 percent over the next 3 years, this would suggest a stock price of around $20.80 in 2025. If sales growth slows to an average of 20 percent, a price of about $16.40 would be implied.

NIO could, however, rise much faster if investors treat the company as they have other EV manufacturers. Tesla, for example, routinely posts P/E ratios in the high double digits or above. If NIO does achieve profitability by 2025, the massive potential of the Chinese marketplace could cause investors to run the stock up to similarly high multiples.

It’s also important to consider that a resurgence in the Chinese and Global economies could support NIO’s growth. If Chinese consumers begin spending more aggressively and NIO continues to expand into global markets, the company could sustain its current growth levels for at least a few more years.

In this best-case scenario, the stock could go above $25 on the basis of rapid revenue growth. A similar boost could be seen if NIO successfully improves its margins as supply chain problems become less severe. Interestingly, the most optimistic of all Nio’s analysts places a $25 target price on the firm too.

In the end, NIO is a difficult stock to predict due to its lack of positive earnings and high levels of volatility. The most probable case, however, seems to be that the stock would reach $20-30 in 2025 if current trends continue.

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While higher prices are certainly possible, it’s likely best to use more conservative estimates due to the uncertainties surrounding NIO.

A final note is that a discounted cash forecast analysis places fair value at $12.82 per share, which would lead to a 50% boon for current investors.

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.

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