Why Nio Stock Keeps Going Up

Key Points

• A Morgan Stanley analyst reiterated his buy recommendation on Nio stock Thursday.

• Nio has a new discount luxury EV coming out in August that compares favorably to its rivals on price and design.

• What Nio doesn't have is profits.

• 10 stocks we like better than Nio ›

Shares of Chinese electric vehicle (EV) manufacturer Nio (NYSE: NIO) were on the rise for a second straight day on Friday, adding 5.6% through 1 p.m. ET on top of Thursday's 6% gain.

You can probably thank Morgan Stanley for that.

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What Morgan Stanley says about Nio

In a note that came out Thursday afternoon, Morgan Stanley analyst Tim Hsiao reiterated his overweight rating on Nio and praised its new Onvo L90, full-size, all-electric, three-row crossover SUV, which has up to 375 miles of range on a full charge. Presale prices, said the analyst in a note covered by StreetInsider, are falling in line with expectations of a 270,000 yuan to 280,000 yuan purchase price (about $37,600 to $39,000 at the current exchange rate), and could get even cheaper once the automaker announces official pricing for Aug. 1 deliveries.

Onvo is a discount marque owned by Nio, similar to Hyundai's Kia brand. And as Hyundai does with its Kia models, Nio is taking a more-for-less approach to the new L90, offering "interior space and specs ... fairly competitive" with Li Auto's L9 full-size luxury electric SUV (for example), but at a price more on the level with the mid-size L6 SUV. Hsiao says the Onvo L90 compares favorably on specs to Xpeng's G9 and Xiaomi's YU7, but at similar prices.

Is Nio stock a buy?

Prices and specs are what attract car buyers. Car stock buyers, by contrast, are more concerned with revenues and profits -- and it's here that the buy thesis for Nio stock starts to break down.

After it tripled its revenues between 2020 and 2023, Nio's sales grew by only 15% last year, and it showed no improvements in profitability. Indeed, to the contrary, its losses increased by 4%. Nio's now losing about $3.3 billion annually, and the analysts covering it don't expect to see the company earn a profit before 2028 -- if ever.

As buy theses go, this one looks pretty weak to me.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.