NIO Post-Q2 Results Analysis: How Should You Play the Stock Now?

Chinese electric vehicle maker NIO Inc. NIO released second-quarter 2025 results yesterday. Both the top and bottom lines missed expectations. Despite the miss, the stock rose over 3% to close the session at $6.58. This could be because of the strong delivery outlook.

NIO Inc. Price, Consensus and EPS Surprise

NIO Inc. price-consensus-eps-surprise-chart | NIO Inc. Quote

The company expects third-quarter deliveries in the range of 87,000-91,000 units, implying 41-47% year-over-year growth. For the fourth quarter, NIO aims to deliver 150,000 units, including 50,000 vehicles across each of its brands—NIO, ONVO and Firefly. New product launches and robust demand are expected to drive growth.

Given these tailwinds, is NIO stock worth buying now? Or is it a good time to lock profits with the shares having rallied more than 50% year to date? While NIO has outperformed the industry and its close peer Li Auto LI, it has underperformed XPeng Inc. XPEV, another key competitor. Li Auto has inched up roughly 2% so far this year, while XPeng has soared 76%.

YTD Price Performance Comparison

NIO’s Solid Product Line-Up Fueling Sales

In the last reported quarter, NIO’s deliveries were up 25.6% to 72,056 units. This was especially driven by growth in mass-market ONVO brand sales as well as strong reception of the high-end and small car brand— Firefly.L60, ONVO’s first product, commenced deliveries late in September.

NIO delivered 21,017 and 31,305 vehicles in July and August, respectively. The ONVO L90—second model from the brand— was launched on July 31 and quickly became a hit, with 10,575 deliveries in August. Its success boosted brand awareness and demand for the first ONVO model, L60, as well, which saw record orders.

Last month, NIO unveiled the all-new ES8, its core premium 3-row SUV. Preorders are open, with test drives and the official launch set for mid-September. ES8 is expected to further strengthen NIO’s position in the segment. Firefly brand has also delivered over 10,000 units in just three months, leading the high-end small BEV market.

NIO is also using its own smart driving chip and full vehicle operating system in models like the ET9 and four more models, which were refreshed for 2025.

NIO Gets an Edge With Battery Swap Tech

NIO’s battery swap technology is a major positive. It has deployed more than 3,500 power swap stations worldwide, including 1,000+ on China’s highways, with over 84 million swaps completed.

By July, the network covered highways between major cities, connecting 550 cities with quick 3-minute swaps, easing range anxiety on long trips. The company has also built more than 27,000 superchargers and destination chargers.

In March, NIO and CATL inked a deal to jointly build the world’s largest and most advanced battery swap network for passenger cars. NIO’s CEO William Li called this a "pivotal moment," underscoring the partnership’s significance in pushing battery swapping into a new phase of growth.

NIO Expects Margins to Improve

By late May, four of the NIO brand models were refreshed—ET5, ET5T, EC6, ES6. But the vehicle margin didn’t show much improvement quarter over quarter, as only approximately 20% of deliveries came from upgraded 2025 models. The company expects vehicle margin to improve in the third quarter with full-quarter deliveries of these models and the launch of L90. The L90 and ES8 aim for roughly 20% gross margin, backed by in-house innovation and cost control. The fourth quarter will mark the first full quarter of sales of both the L90 and the new ES8. Vehicle margins are targeted at 16-17%, supporting breakeven.

A Look at NIO’s Valuation & Estimates

NIO is currently trading at a forward sales multiple of 0.8, lower than Li Auto and XPeng but higher than the industry.

NIO P/S vs. Industry, LI & XPEV

The Zacks Consensus Estimate for NIO’s 2025 revenues implies 50% year-over-year growth. The bottom line is pegged at a loss of $1.02 but implies an improvement from a loss of $1.51 incurred last year.

Buy, Sell or Hold NIO Now?

NIO continues to gain traction in deliveries. Its strong growth forecasts, battery swap strategy, expanding multi-brand portfolio are key long-term catalysts. The company also has a more attractive valuation compared to LI and XPEV. Having said that, competition in China’s EV market is fierce, which may put pressure on pricing and margins. Currently, the breakeven timeline target looks a little too ambitious. Also, the company is bearing the brunt of increasing SG&A expenses and has a high long-term debt to capitalization of 75%.

While existing shareholders should benefit from holding NIO for its long-term potential, new investors may want to wait for clearer signs of margin improvement and financial discipline.

NIO currently carries a Zacks Rank #3 (Hold). 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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