NIO Stock Outlook: Is Nio a Buy After Its Q4 2023 Report?

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In the world of China-based EV producers, Nio (NYSE:NIO) remains a top option many growth investors continue to pay close attention to. Unfortunately, NIO stock has continued to trade in a rather bearish fashion, now hovering just above its 52-week lows.

Of course, the overall EV sector has been hit by growth concerns, as competitive pressure pick up and price cuts permeate this space. Nio hasn’t been immune to such pressures, though the company did report a smaller-than-anticipated loss for fiscal 2023.

Looking forward to this year and beyond, let’s dive into whether NIO stock is worth buying at current levels, for investors anticipating a rebound in EV stocks in 2024.

Recent Earnings Report

Nio’s aforementioned Q4 earnings report showcased revenue of 17.10 billion yuan ($2.41 billion). This number was slightly less than what analysts expected, and drove some bearish sentiment around the stock. The company’s cash reserves currently sit at 57.3 billion yuan ($8.1 billion), though more capital expenditure will likely be needed. That’s especially true following the announced release of the company’s new ET9 model via CEO William Li.

Nio’s net loss did shrink last year, as overall sales grew 4.6% on a year-over-year basis. The company’s recent growth has led to a valuation multiple that’s cheaper than most of its peers. On a price-sales basis, an argument can be made that NIO stock may be relatively attractive, leading some investors to take a deeper dive into this company.

However, until positive earnings are reported, this is a hard stock to value from a fundamentals perspective. There’s relative underperformance in terms of growth with this name, leading many bears to wait patiently on the sidelines for bottom-line improvements to be shown.

$2.9 Billion Down the Drain

Despite running past sales projections in Q4 2023, Nio’s CFO Steven Feng says that prioritizing business goals, system enhancement, and refining cost management will be the target for 2024. 

The company hasn’t had any world-changing product launches for 2024. Yet, analysts are awaiting a mass-market brand to compete with Tesla’s domestically-made models, possibly reducing losses. Past successes seem so far away with Nio’s recent challenges and CYVN Holdings LLC supplying investment. CEO Li revealed plans to launch Alps, the mentioned mass-market brand that will go against Tesla’s SUV starting in Q4.

Nio joined forces with Chinese automakers like Geely and Anhui province authorities to develop battery-swap technology. This will allow EVs to swap depleted batteries for charged ones, increasing range and decreasing worries. Nio’s US-listed shares swooped down 41% this year.

Mixed Reaction from Analysts

NIO’s performance was very encouraging with a lower operating loss paired with higher fourth-quarter deliveries of almost 50,000 vehicles. 2023 watched as NIO set delivery records and sat on the throne in China’s market for high-end battery electric vehicles. CEO William Bin Li has plans for upcoming product developments and user experience enhancements. However, it’s unclear how these developments will impact NIO stock in the quarters to come.

As of right now, I remain on the fence, alongside analysts. I think the company’s positioning in the Chinese EV market is solid, though I question the company’s long-term upside relative to its peers. Thus, I think there are likely better options in this space worth considering, aside from Nio.

On the date of publication, Chris MacDonald did not have (either 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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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