Will Nio Stock Reach $1000?
Nio is one of the largest EV manufacturers in China and it is expanding its base internationally to Europe. But Nio Inc share does not share the same dominance. In the last year, the stock is down 73%.
The right question is whether this is the right time to buy Nio shares or if there is more downside ahead. Whether Nio stock will touch an all-time high again or march even higher to $1000 in the coming decade?
Will Nio Stock Reach $1000? Factor to Consider
The growth outlook remains positive- The EV manufacturer has faced several headwinds in past quarters like shortage in chip supplies, and China Covid lockdowns, but the good thing is Nio is back on track in terms of deliveries. It delivered 29% more cars in Q3 FY 2022-23 and generated $1.8 billion in revenue, up 32.6% YoY. It delivered 31,607 vehicles in the third quarter and is expected to deliver 43,000 to 48,000 vehicles in the fourth quarter. That is an encouraging outlook and the credit goes to the sedan, ET5.
The biggest challenge for Nio- The single biggest challenge Nio is facing apart from macroeconomic headwinds is that there is no clear path to profitability. Nio’s margins are headed downward in each quarter.
|Margin Type||Q2 2022||Q1 2022||Q4 2021|
Nio margins were much higher in the second quarter of 2021 at 20%. A more worrying sign is that there is healthy growth in the top line, but the same is not seen in the profit margins. Cost pressure is the biggest challenge for Nio Inc.
The Financial Forecasts to reach $1000
For Nio Inc, as the net income reported is negative, earnings per share (EPS) is also negative. Hence, Nio Inc stock cannot be forecasted based on EPS. But the Price to Sales ratio can be used for predicting the price five years down the line.
The revenue forecast for Nio Inc in the coming years is quite positive.
The revenue forecast for 2025 is $28 billion. It is expected to grow at a CAGR of approximately 48%. Hence, the revenue forecast for 2030 will be $193 billion. Price to sales ratio is 2.53. It is one of the lowest in the last many years. If we assume a moderate P/S ratio of 4, the share price for Nio Inc is forecasted to reach $112 in 2025 and $772 in 2030. So NIO is likely to reach the $1000 level somewhere between 2032 and 2035.
Will Nio Stock Reach $1000? Conclusions
Nio Inc is coming back on track. The increased number of deliveries suggests that there are improvements in the execution. The concern remains in terms of net loss reported in every quarter. Partially, it is due to the increased costs of batteries and Covid lockdowns in China. But these factors will ease in coming quarters.
In short term, Nio Inc’s share is bearish as price forecasts by analysts were cut down. UBS analyst Paul Gong cut the share price target to $13 from $32. Similarly, Mizuho analyst Vijay Rakesh cut the price target from $40 to $34.
Nio Inc is expected to experience short-term volatility, but it could be a long-term winner if it continues to grow its revenue by 48% CAGR. It is a bit optimistic, but surely Nio is at somewhat bottom to pick for long-term investment.
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