Is NIO a Buy After Logging Record Vehicle Deliveries in Q4?

China’s electric vehicle (EV) maker NIO Inc. NIO delivered 72,689 vehicles in the fourth quarter of 2024, up 45.2% year over year. This marked a new quarterly record and was within the company’s forecast of 72,000-75,000 units. In December alone, NIO sold 31,138 vehicles (up 73% year over year), which was also a new monthly high. Deliveries comprised 20,610 units from the NIO brand and 10,528 vehicles from the ONVO brand. This was the first time NIO’s monthly deliveries exceeded 30,000 units.NIO’s closest peers, Li Auto LI and XPeng Inc. XPEV, also recorded robust delivery numbers last month. While XPEV’s sales surged 82% year over year to 36,695 units, LI delivered 58,513 vehicles (16.2% year-over-year growth). China’s leading EV maker, BYD Co. Ltd BYDDY, posted its best-ever sales in the final quarter of 2024 and is heating up the competition with the biggest EV maker in the world, Tesla TSLA.So, while NIO has achieved robust growth in deliveries, it should not be forgotten that the competition in China’s EV market is intense. China leads the world in EV sales and that’s likely to continue thanks to government support, subsidies and incentives. According to Financial Times, China’s EV sales are expected to top 12 million vehicles this year, marking a roughly 20% growth from 2024 levels. Although NIO appears poised for a robust growth phase supported by Chinese EV landscape, tough competition could limit sales and also prompt the company to slash prices, which may clip gross margins. Investors might be wondering if it’s worth placing their bets on NIO now.Currently, NIO is trading below $5, way below its all-time high of $62.84 on Feb. 9, 2021. In fact, it’s also trading below its IPO price of $6.26 now. So, is it a bargain and should you buy NIO shares now? Let’s find out.Factors to Work in Favor of NIONIO is capitalizing on the rapidly expanding EV market by offering a robust lineup of high-performance SUVs and sedans, including the ES6, ET5T, ES8, EC6, EL7, ET5, ET7, and EC7 models. These vehicles have driven delivery growth, further bolstered by the recent launch of the executive flagship ET9, with deliveries set to begin in March. Encouragingly, NIO anticipates 2025 vehicle deliveries to double from 221,970 units sold in 2024. NIO’s strategy of broadening its reach beyond the luxury segment with the ONVO brand marks a pivotal shift. The ONVO L60, which commenced deliveries in September and undercuts Tesla’s Model Y on pricing, has already shown promise. ONVO's monthly production capacity hit 10,000 units in December, as expected, and it is likely to reach 20,000 units by March.NIO is expanding its product portfolio further with its third brand— Firefly— targeting the compact car segment. The first Firefly model, priced competitively, has already begun pre-sales and is expected to begin deliveries in the country in April. After China, Firefly is set to launch in Europe and is poised to rival Mercedes' Smart and BMW's Mini.Complementing this diversified portfolio, NIO's innovative Battery-as-a-Service (BaaS) model, which allows drivers to swap batteries at battery-swapping stations in China, continues to enhance its value proposition. NIO will launch its 3000th battery swap station in China tomorrow.Challenges in NIO’s PathDespite impressive sales growth, NIO faces persistent challenges that hinder its profitability. The company is yet to achieve a full-year profit, weighed down by escalating R&D and expansion costs. NIO has reported escalating losses each year from 2020 to 2023. The company incurred $2.1 billion in losses during the first three quarters of 2024.Elevated leverage and a shrinking cash position — from RMB 32.9 billion in December 2023 to RMB 23.7 billion in September 2024 — raise concerns about financial flexibility. NIO’s reliance on shareholder dilution to raise funds has also eroded existing investors’ stakes. Over the last five years, Nio's shares outstanding have doubled.While NIO projects a doubling of EV sales next year, rising operating expenses from ONVO network expansion and competitive pricing strategies amid fierce competition may clip margins.NIO faces regulatory challenges, particularly from trade wars and tariffs. In October, the European Union substantially hiked tariffs on Chinese EVs, citing unfair advantages from government subsidies that allow them to undercut competitors. These tariffs could impact the Firefly brand's prospects in Europe.Price Performance & ValuationNIO underperformed the industry and its peers in 2024.1 Year Price Performance Image Source: Zacks Investment ResearchFrom a valuation standpoint, NIO’s price-to-sales (P/S) ratio, currently at 0.79, is above the industry’s 0.66. The stock has a Value Score of C.Image Source: Zacks Investment ResearchWait-And-See Approach for NIONIO’s product lineup and strategic expansion efforts position it to gain a strong foothold in the EV market in the long run. However, its persistent losses, financial constraints and rising competition present near-term challenges. Until NIO demonstrates meaningful progress in improving margins and achieving operational efficiency, a cautious stance is warranted. While new investors should wait for clearer signs of profitability and financial stability, existing shareholders should maintain their positions.NIO Price TargetsImage Source: Zacks Investment ResearchThe Zacks Consensus Estimate for the company’s 2025 top and bottom lines implies a year-over-year improvement of 48% and 27%, respectively. NIO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks hereJust Released: Zacks Top 10 Stocks for 2024Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. You can still be among the first to see these just-released stocks with enormous potential. See New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Tesla, Inc. (TSLA): Free Stock Analysis Report NIO Inc. (NIO): Free Stock Analysis Report Byd Co., Ltd. (BYDDY): Free Stock Analysis Report Li Auto Inc. Sponsored ADR (LI): Free Stock Analysis Report XPeng Inc. Sponsored ADR (XPEV): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks