Despite a sharp decline of over 36% since the beginning of the year, Nio (NYSE: NIO) stock is poised for a potential turnaround. However, Tim Hsiao, an analyst at Morgan Stanley, recently revised his price target for Nio downwards from $13 to $10 per share. Let’s delve into the rationale behind Hsiao’s revised outlook on Nio stock.
The Forecast Ahead: Navigating Speed Bumps
Investors eyeing Nio for its potential growth in the electric vehicle (EV) sector might need to exercise caution. Hsiao anticipates significant challenges for Nio in the next two years. He has downscaled his estimates for Nio’s shipments in 2024 and 2025, projecting increased losses in 2023 due to ongoing restructuring efforts. Unlike its American counterpart Tesla (NASDAQ: TSLA), Nio is yet to achieve profitability, a concerning aspect that investors should take note of.
Charting Nio’s financial trajectory, the company has witnessed escalating losses recently, struggling to rein in costs at both the top and bottom line. In 2023, Nio reported a diminished gross margin of 5.5%, a stark contrast to the healthier 10.4% and 18.9% margins seen in 2022 and 2021 respectively. This trend highlights the pressing need for Nio to bolster its gross margin before enticing growth-focused investors seeking lucrative EV opportunities.
Considering these challenges, investors may want to explore alternate avenues within the EV sector until Nio addresses its profitability concerns.
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Disclosure: The author, Scott Levine, has no holdings in the mentioned stocks. The Motley Fool maintains positions in and endorses Nio and Tesla. For further information, refer to The Motley Fool’s disclosure policy.