Should You Buy NIO Shares After a 31% Surge in the Past 3 Months?

NIO Inc. NIO shares have been trending higher over the past three months. Shares of the EV maker have risen 30.7% over the past three months, outperforming the Zacks Automotive - Foreign industry’s growth of 6.3%. 

NIO has also outperformed industry peers, including BYD Company Limited BYDDY and XPeng Inc. XPEV. BYD shares have plunged 26.3%, and XPeng shares have lost 0.6%. The rise in share price was largely driven by the launch of ONVO L90 on July 31, 2025. NIO delivered more than 4,000 units of L90 within 10 days of its launch. 

Currently, NIO’s ONVO manufacturing facility in Hefei, Anhui province, is running at full capacity to boost output and speed up deliveries. ONVO aims to deliver more than 10,000 L90 units in August. If NIO reaches this goal, the L90 will record the highest monthly sales of any NIO model to date.

Three-Month Price Return Performance

Factors Stimulating NIO’s Performance

In the first quarter, NIO introduced the Veeco product line, an integrated R&D mechanism combining resources from its NIO, ONVO and Firefly brands, to enhance operational efficiency. In its industrialization cluster, NIO restructured logistics, quality and supply-chain functions by eliminating overlapping roles and optimizing workflows. These collective efforts are expected to reflect in improved results starting from the second quarter.

NIO has set specific cost-reduction targets. It planned to lower R&D spending by 15% in the second quarter, with a further goal of reducing the expense to RMB 2-2.5 billion by the fourth quarter, indicating a decline of 20-25% year over year. It is exercising strict control over SG&A expenses, balancing marketing investments against returns and plans to reduce these costs sequentially. By the fourth quarter, NIO targets to limit non-GAAP SG&A expenses to below 10% of its revenues as part of its broader breakeven target.

NIO’s battery swap technology, a part of NIO’s battery as a service (BaaS) strategy, is a game-changer and provides an edge to the firm over its peers. NIO currently has more than 3,408 swap stations and has installed over 26,000 power and destination chargers. Additionally, the company is constructing a new manufacturing facility in Wuhan, targeting 1,000 battery swap stations annually. 

NIO expects its losses to narrow gradually in 2025 amid sales growth and cost savings. It is likely to achieve its breakeven target in the fourth quarter of 2025.

NIO’s Valuation & Estimates

From a valuation standpoint, NIO appears relatively overvalued. The stock trades at a forward price-to-sales (P/S) ratio of 0.65, above the industry’s 0.45. 

 
The Zacks Consensus Estimate for NIO’s 2025 sales and earnings indicates year-over-year growth of 48.2% and 30.5%, respectively. The Zacks Consensus Estimate for 2025 EPS has moved down a penny in the past 30 days, while for 2026, the EPS estimates have moved up 5 cents in the past seven days.

Should You Buy the Stock Now?

Although the launch of ONVO L90 has boosted NIO’s deliveries, the company has been facing significant pressure and challenges in managing the ONVO product and its vehicle margin. The key driver of gross margin for the ONVO brand is not expected to materialize until the third quarter. The company projects ONVO's 2025 vehicle margin to be approximately 15%, lower than the vehicle margin of 20% expected from the NIO brand.

Moreover, the firm's long-term debt to capital ratio stands at 0.76, higher than the industry's 0.28. Elevated leverage restricts the firm’s financial flexibility to tap into growth opportunities. The company's declining cash position — from RMB 19.3 billion in December 2024 to RMB 8.1 billion in March 2025 — raises concerns about potential fundraising and shareholder dilution.

Considering these factors, new investors may delay buying the stock, while current shareholders could choose to keep their positions.

NIO carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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