While the overall stock market – and the artificial intelligence (AI)-driven technology sector in particular – has been doing very well, with the S&P 500 index reaching new all-time highs in 2024.
This overall trend, however, has not been followed by the once-popular electric vehicle (EV) industry, which has been suffering for more than a year from low demand, rising competition, and continuously declining valuations in the market.
On the other side of the Pacific, however, February brought a change in trend as multiple Chinese EV companies, including BYD (SHE: 002594), Xpeng Inc (NYSE: XPEV), and Li Auto (NASDAQ: LI) all rallied between 5% and 65% during the month.
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Still, one Chinese firm in the industry has followed the downtrend observable in the U.S. – Nio (NYSE: NIO) – and despite its long-standing and unbroken decline, analysts have largely remained optimistic – if cautiously – as with the sector’s many other companies.
Short-term bears, long-term bulls
With the Q4 earnings report – covering the entire fiscal year 2023 along with its final trimester – scheduled for release on March 5, Nio is the next EV company on the investors’ chopping block.
Given the recent headwinds the industry is facing, it isn’t surprising that analysts are bearish when it comes to their forecasts for the upcoming Nio report.
For example, it is estimated that Nio will announce a $0.51 loss per share on March 5 – higher than in the third quarter and equivalent to the one in Q2 2023 and Q4 2022.
On the other hand, analysts are also predicting that the downtrend will come under control in the coming months and estimate that the loss per share will stand at $0.34 in Q1 2024 and drop to $0.2 by Q2 of the year.
Similarly, despite the downturn, Nio retains an overall “moderate buy” rating on the stock analysis platform TipRanks with only 1 out of the 10 experts represented ranking Nio stock as a “sell.”
At press time, Nio boasts 6 “buy” ratings, with another 3 analysts being neutral. Similarly, the 12-month price target for NIO stock remains relatively high as, on average, experts believe it will climb as much as 73.53% to $10.03.
Additionally, even the lowest price target of $5 represents only a minor decline from the press time price of $5.78 while most of its other forecasts – including the ones associated with “hold” ratings foresee significant upsides up to $18.70 per share.
Why are analysts bullish on Nio in the long run?
Despite the recent performance of the EV sector, there is a consensus belief that the ongoing downturn is the product of current conditions in the economy and that the demand for electric vehicles hasn’t peaked. The optimism is further bolstered by the February developments in China as the Asian country’s EV makers have been logging a similar performance to their American counterparts for multiple months.
While electric vehicles remain among luxury goods – which have seen a general decline in recent months – they are considered a crucial component of the green transformation of global consumption patterns, and the firms operating in the industry are continuously working on new technologies that are set to drastically reduce prices – Elon Musk’s Tesla (NASDAQ: TSLA) is, for example, working to roll out a €25,000 ($27,000) model in 2024.
Nio itself remains at the cutting edge, as evidenced by a recent multi-year technology-sharing agreement with Forseven Limited, a UK-based luxury electric vehicle maker in relatively early stages of development.
Nio stock price chart
Despite the long-term optimism, Nio has been heavily affected by the ongoing downturn, and its stock has declined a full 41.62% since its initial public offering (IPO). The last 52 weeks have been particularly damaging in terms of stock market performance, and NIO fell 38.45% in the time frame.
The decline was equally dramatic for Nio in 2024 and the firm’s shares not only failed to turn positive during the early February industry rally but are a total of 31.35% in the red since January 1.
Finally, while the last full week of trading didn’t bring a respite for Nio – its stock fell 4.15% – the EV maker managed to close 2.30% in the green on Tuesday, February 27, at $5.78.
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