There’s a good-news, bad-news situation with China-based electric vehicle (EV) manufacturer Nio (NYSE:NIO). The bad news is that some analysts reduced their price targets on NIO stock, and the company’s financial stats have some sore spots. Yet, there are also some highly encouraging data points to consider. Furthermore, potentially positive news from China could benefit Nio and its stakeholders.
Investing in Chinese stocks hasn’t been easy in 2022. Holding shares of EV manufacturers has also been challenging. All in all, Nio’s shareholders have been on a bumpy ride.
This doesn’t mean it’s time to bail, however. Nio doesn’t have to be a perfect business, as long as it’s growing and improving. The automaker’s story is still unfolding — and by 2025, the Nio share price will probably be much higher than it is today.
News From China Could Buoy NIO Stock
You may recall Oct. 24 as one of the worst days for U.S.-listed Chinese stocks in recent memory. In fact, it was the steepest single-day decline for Hong Kong-listed stocks since 2008.
None of this was Nio’s fault, of course. The selloff occurred because Chinese President Xi Jinping secured a third term. He’s known for imposing harsh Covid-19 restrictions, and this could hamper businesses like Nio.
The selloff might have been overdone, though. In early November, citing “three sources familiar with the matter,” Reuters reported that China “may soon further shorten quarantine requirements for inbound travellers.”
Then, just recently, the Wall Street Journal reported that China’s government eased some of its zero-Covid policies. So, perhaps the fears of an overly restrictive Chinese government were overstated, and Nio may have an opportunity to thrive as a business in the coming years.
Impressive Vehicle-Sales Growth Bodes Well for Nio
Meanwhile, Nio recently disclosed its unaudited third-quarter 2022 financial and operational results. Given its current vehicle-sales growth rate, Nio should be a much bigger company in 2025.
Don’t misunderstand — Nio’s quarterly results weren’t perfect. The automaker sustained a net earnings loss in Q3, and Nio’s gross margin contracted on a year-over-year (YOY) timeframe.
It’s possible that Mizuho analyst Vijay Rakesh had these issues in mind when he reduced his price target on NIO stock from $40 to $34. Bank of America analyst Ming Hsun Lee also published a price-target cut on Nio shares, in this instance from $16 to $15.
If those price-target reductions are deal-breakers for you, that’s a shame, because there’s more to the story. During the third quarter of 2022, Nio’s vehicle sales jumped 38.2% YOY to the equivalent of around $1.678 billion. Moreover, the company delivered 10,059 vehicles in October 2022, indicating a jaw-dropping 174.3% YOY increase.
Looking ahead to the fourth quarter, Nio expects to deliver between 43,000 and 48,000 vehicles, which would represent YOY growth of around 71.8% to 91.7%. Also for Q4, Nio anticipates YOY revenue improvement of roughly 75.4% to 94.2%, to a dollar-translated range of between $2.442 billion and $2.703 billion.
NIO Stock Should Reach $100 in 2025
You can worry about some analysts’ price targets if you want to. However, the hard data shows that Nio’s vehicle sales are growing quickly. In addition, Nio expects to increase its vehicle deliveries and revenue YOY during the current quarter.
Frankly, it’s amazing that NIO stock still trades below $15. It appears that the market hasn’t yet priced in the company’s rapid expansion as an EV manufacturer.
That’s fine, as it presents a terrific buying opportunity. The share price won’t likely stay this cheap during the next few years, and $100 in 2025 should reflect Nio’s evolution into an EV-market powerhouse.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.