Nio: Buy or Bye? The $6 Question!

Ladies and gentlemen, buckle up! We're diving headfirst into the electric vehicle (EV) revolution, and today, we're talking about Nio (NYSE: NIO). This stock has been on a wild ride, and right now, it's trading below $6. So, should you buy Nio while it's cheap, or is this a sinking ship? Let's break it down!

First things first, let's talk about the elephant in the room: Nio's stock price has plummeted by roughly 85% over the past three years. Ouch! But here's the thing: the dollar value of any stock is far less important than its valuation metrics. Nio might be trading at a measly $5 a share, but when you look at its price-to-sales ratio, it's actually a bargain compared to its competitors. This under-$5 stock looks more like a steal than you might have originally thought. If Nio's price-to-sales ratio rose to more closely match its peers, that would amount to a generous gain in its stock price. So, don't let the low price tag fool you—this stock has potential!

Now, let's talk about what's coming in 2025. Nio is setting itself up for substantial growth with the production and deliveries of two new models—the Firefly and Onvo. These models are expected to push deliveries and revenues higher, and evidence of that had already appeared in December. Fresh deliveries of its Onvo model drove Nio's deliveries above the 30,000 unit mark to a monthly record. But Nio, already one of the largest Chinese EV players by sales, has much bigger ambitions for 2025. On the back of its two newer models, the company expects to deliver roughly 440,000 units in 2025—nearly double 2024's sales. Part of its expansion plan revolves around expanding into 25 overseas markets by the end of this year. And what might be most impressive about that plan is that it expects to deliver this growth while improving gross profit margins, controlling costs, and boosting operational efficiency. This is a company on the move, folks!

But wait, there's more! Nio has long talked up its international growth ambitions. It already has a presence in Europe and is even launching a new brand called Firefly that is designed specifically for the continent. However, things are looking increasingly uncertain here. In January, US Commerce Secretary Gina Raimondo described growing sales of Chinese EVs across the West as a national security risk. She highlighted the fact that they’re packed with thousands of chips and sensors that collect huge amounts of driver and location information. “Do we want all that data going to Beijing?” she asked. My guess is that the answer to this question will eventually be no. And unlike BYD, which is building a factory in Hungary to circumvent any European tariffs on Chinese-made EVs, Nio doesn’t have deep pockets. Therefore, I’m sceptical about the company’s chances of international success.

Now, let's talk about the competition. BYD, which overtook Tesla to become the world’s biggest EV seller in 2023, intends to launch 30 new models in the coming three years. So fierce competition is a concern here. The analyst anticipates 2024 revenue coming in at CNY73bn ($10.1bn) rather than the current consensus for CNY78.9bn ($10.9bn). He also sees a widening adjusted per-share loss. Needless to say, this wouldn’t be a recipe for share price appreciation.

But here's the thing: Nio is due to release the first model of its Alps sub-brand—a sport utility vehicle (SUV) codenamed DOM—in the second half of this year. This will see the company expand beyond its current premium segment to the mass market. Alps’ models will be built on NIO’s third-generation technology platform and will include its popular AI-powered in-car assistant. Reports suggest the first model will be priced at around $34,000. The issue here, however, is that this sub-brand is entering an already overcrowded SUV market in China. There are literally dozens of similar offerings from various manufacturers, both domestic and foreign. So success is far from guaranteed.

So, should you buy Nio while it's below $6? The answer is... it depends! If you're a risk-taker and believe in Nio's growth potential, this could be a great opportunity. But if you're looking for a safer bet, you might want to steer clear. Remember, the market hates uncertainty, and Nio has a lot of it right now. But if management can not only deliver top-line growth but also improve its gross margins, 2025 could be an excellent year for Nio's investors. So, do your homework, and make the call that's right for you. And remember, this is not financial advice—it's just one man's opinion. So, BUY NOW or STAY AWAY? The choice is yours!