Is Nio Stock Undervalued At $7.50?

NIO: Nio logo

The sell-off in Chinese luxury electric vehicle maker Nio stock (NYSE:NIO) has continued over 2023, with the stock down by roughly 21% year-to-date, taking the total 12-month returns to close to -60%. In comparison, Tesla stock is down 10% over the last 12 months, while Nio’s Chinese rival Li Auto has seen its stock remain roughly flat.  So what’s driving the continued sell-off in the stock? Nio appears to be falling behind in the Chinese EV race, with a mixed delivery performance. While the company had guided that it would more than double its deliveries this year to about 250,000 units, it has only delivered a total of 43,854 vehicles over the first five months of the year, marking an increase of 15.8% year-over-year. This means that the company will need to deliver over 29,000 vehicles each month going forward to meet its lofty target. In comparison, Li Auto delivered a total of 28,277 vehicles in May 2023, up 146% year over year. This number is about 4.5x Nio’s monthly deliveries. Nio’s Q1 results, due this week, are also likely to be mixed, with the company likely to continue to face some cost pressures and slower revenue growth. Separately, Nio invested 995 million yuan (about $140 million) for a 19.9% stake in a nuclear fusion startup. This might not be sitting well with Nio’s investors, given that Nio remains a loss-making company focused on EVs.

However, it’s likely that the stock could be bottoming out. Nio currently trades at just about $7.50 per share, over 85% off its all-time highs. Nio has also been refreshing its product lineup, with the new EC7 coupe SUV, as well as the all-new ES8 SUV, and this could also help demand and average selling prices. We also think Nio’s valuation remains relatively compelling. The stock presently trades at just about 1.1x estimated 2023 revenues, which is well below other EV players such as Tesla and Li Auto. See our analysis of Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for a detailed look at how Nio stock compares with its rivals Li Auto and Xpeng.

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 Returns Jun 2023
MTD [1]
YTD [1]
Total [2]
 NIO Return 0% -22% 19%
 S&P 500 Return 2% 12% 91%
 Trefis Multi-Strategy Portfolio 3% 13% 256%
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[1] Month-to-date and year-to-date as of 6/4/2023
[2] Cumulative total returns since the end of 2016