Key Points
A Morgan Stanley analyst reiterated his buy recommendation on Nio stock Thursday.
Nio has a new discount luxury EV coming out in August that compares favorably to its rivals on price and design.
What Nio doesn’t have is profits.
10 stocks we like better than Nio ›
Shares of Chinese electric vehicle (EV) manufacturer Nio (NYSE: NIO) were on the rise for a second straight day on Friday, adding 5.6% through 1 p.m. ET on top of Thursday’s 6% gain.
You can probably thank Morgan Stanley for that.
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What Morgan Stanley says about Nio
In a note that came out Thursday afternoon, Morgan Stanley analyst Tim Hsiao reiterated his overweight rating on Nio and praised its new Onvo L90, full-size, all-electric, three-row crossover SUV, which has up to 375 miles of range on a full charge. Presale prices, said the analyst in a note covered by StreetInsider, are falling in line with expectations of a 270,000 yuan to 280,000 yuan purchase price (about $37,600 to $39,000 at the current exchange rate), and could get even cheaper once the automaker announces official pricing for Aug. 1 deliveries.
Onvo is a discount marque owned by Nio, similar to Hyundai’s Kia brand. And as Hyundai does with its Kia models, Nio is taking a more-for-less approach to the new L90, offering “interior space and specs … fairly competitive” with Li Auto‘s L9 full-size luxury electric SUV (for example), but at a price more on the level with the mid-size L6 SUV. Hsiao says the Onvo L90 compares favorably on specs to Xpeng‘s G9 and Xiaomi’s YU7, but at similar prices.
Is Nio stock a buy?
Prices and specs are what attract car buyers. Car stock buyers, by contrast, are more concerned with revenues and profits — and it’s here that the buy thesis for Nio stock starts to break down.
After it tripled its revenues between 2020 and 2023, Nio’s sales grew by only 15% last year, and it showed no improvements in profitability. Indeed, to the contrary, its losses increased by 4%. Nio’s now losing about $3.3 billion annually, and the analysts covering it don’t expect to see the company earn a profit before 2028 — if ever.
As buy theses go, this one looks pretty weak to me.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
