Key Points
Nio's stock remains below its IPO price.
It's growing rapidly, and its stock looks deeply undervalued.
Nio(NYSE: NIO), a major producer of electric vehicles (EVs) in China, went public at $6.26 per ADR in 2018. But today, its stock still trades at less than $5 with a market cap of 88.4 billion yuan ($12.7 billion), which values the company at less than one times this year's sales.
Nio's valuations are likely being compressed by the intense macro and competitive headwinds for China's crowded EV market. However, I believe Nio's stock is undervalued at these levels -- and it could easily turn a modest $1,000 investment into a lot more money over the long term.
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Image source: Nio.
What happened to Nio over the past few years?
Nio's namesake brand, which accounts for most of its revenue, sells a broad range of electric sedans and SUVs. Its newer Onvo and Firefly sub-brands, which are growing faster, sell cheaper SUVs and compact cars, respectively.
Nio differentiates itself from competitors with swappable batteries, which can be quickly replaced at its own battery-swapping stations as a faster alternative to traditional charging. It's also gradually expanding into Europe to reduce its dependence on the Chinese market.
Nio now operates more than 3,500 battery swap stations across China and Europe, up from just 777 at the end of 2021. From 2021 to 2024, its annual vehicle deliveries more than doubled from 91,429 to 221,970. It expects to deliver about 336,221 vehicles for 2025, with most of that growth driven by its higher-end Nio vehicles and newer Onvo and Firefly cars.
Nio's vehicle margin fell from a peak of 20.1% in 2021 to 12.3% in 2024, but that figure stabilized and expanded throughout 2025 as it sold a higher mix of higher-margin vehicles. It also recently predicted it would generate its first quarterly profit -- by both GAAP (generally accepted accounting principles) and non-GAAP measures -- in the fourth quarter of 2025.
Why is Nio's stock undervalued?
From 2025 to 2027, analysts expect Nio's revenue to grow at a 29% CAGR. If Nio meets those expectations and trades at a more generous 5x forward sales by the beginning of next year, its stock could soar more than 8x over the next 12 months.
For reference, Tesla(NASDAQ: TSLA) -- which is larger but growing more slowly -- trades at 15 times this year's sales. Therefore, Nio could be one of the best EV stocks to buy right now, as long as you're willing to tune out all of the near-term market noise.
Should you buy stock in Nio right now?
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
