NIO (NYSE:NIO) is a stock that often gets much attention from investors as many are trying to develop a NIO stock price prediction.
Achieving this task requires a certain level of expertise owing to the current macroeconomic conditions.
Like many companies operating in the electric-vehicle sector, Nio has experienced a significant decrease in valuation. Much of it is because of various industry pressures, macroeconomic hurdles, and growing skepticism surrounding growth stocks.
The optimistic scenario for NIO presents a more alluring option as recent reports indicate that the demand for its automobiles remains robust. NIO is continuously expanding its manufacturing capabilities, addressing supply chain difficulties, and releasing fresh vehicle models. This implies a worthwhile opportunity available for every type of investor.
In his own Nio stock prediction, Analyst Vijay Rakesh of Mizuho believes there is a tremendous upside that aggressive investors can exploit. In issuing his verdict on the stock, Rakesh maintained a Buy rating and set a price target of $25, representing an upside of over 137% compared to Friday’s closing price.
Although the figure may seem exaggerated, there are optimistic indicators that investors considering investing in NIO should consider.
What Will NIO Stock Be Worth in 2030?
The future value of NIO stock largely relies on the expansion of China’s electric vehicle sector. Assuming this market continues to expand significantly, a workable scenario exists where NIO’s stock price could climb up to $50 per share in the coming years.
Three key factors show a promising future for NIO’s stock. First, NIO’s location in China, the world’s largest automobile market, has substantial room for growth in the EV sector. China’s reopening economy is further expected to fuel future EV demand.
Second, NIO’s consistent innovation is a significant driver of its success. The company introduces at least one new automobile model annually, with the ET7 and ET5 sedans released last year gaining popularity and accounting for over 50% of monthly deliveries.
NIO’s vehicles also appeal to middle-to-upper-income consumers. These consumers are less likely to alter their buying behavior during economic uncertainties.
EV buyers have widely adopted NIO’s battery-as-a-service subscription, launched in August 2020. BaaS enables consumers to swap, upgrade, and charge their batteries, receive a discount on their initial purchase, and generate high-margin, recurring subscription revenue for NIO.
However, challenges exist. Chinese supply chain issues constrain NIO’s production expansion efforts. Despite management’s goal of delivering up to 250,000 EVs this year, the company is currently on track for around 40,000 EV deliveries in the first quarter, equivalent to an annual run rate of 160,000.
Attractive Valuation
EV stocks have recently made investors anxious. And market uncertainties have made growth-dependent stocks out of favor. Thus, it’s unsurprising that the market reacted unfavorably to the company’s Q4 earnings report and short-term guidance.
Despite NIO’s vehicle revenue increased by approximately 60% year-over-year in Q4, the company fell short of its vehicle delivery target and reported a significantly wider loss than expected. The business incurred a deeper loss because of a more than doubled research-and-development cost and rising manufacturing expenses, leading to a drop in share price following the earnings announcement.
NIO’s net losses remain an issue, even as its sales have grown dramatically from $2.5 billion to $7.1 billion. This suggests that NIO is losing more money with every sale, although this may be a simplistic assessment as the company is setting the foundation for future profitable years. Investors still await robust evidence of this trend, resulting in the stock’s poor performance.
Despite the recent challenges faced by Nio, one silver lining is that the company’s stock is trading at a considerable discount compared to its historical values. NIO’s price-to-sales (PS) ratio range over the past 10 years has been as low as 1.28, as high as 33.15, and with a median of 5.19. As of now, NIO’s PS ratio stands at 2.37.
In the last seven years, NIO’s PS ratio has ranged from a low of 1.28 to a high of 33.15. The median PS ratio over this period was 5.19. These figures show that NIO’s current PS ratio is relatively low, potentially indicating an undervalued stock.
NIO Stock Price Prediction
NIO is undervalued right now. The future for the stock is bright as it diversifies its operations. As a result, the recent fall in its stock price is a great time for investors to get in on the action.
Although making a price prediction for NIO stock is difficult, one can safely say it will rise from here. The bottom is near, and the only way is up for this one.
On the publication date, Faizan Farooque did not hold (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.