Stock Market

NIO Stock Analysis: The EV Dark Horse Poised for a Comeback?

My stance on Chinese EV maker Nio (NYSE:NIO) stock has changed, and I now see more relative upside for the company’s competitors, looking at this space more broadly.

However, there are reasons investors may consider this stock an excellent long-term play in this market. I was once bullish on Nio, and I can understand the bull argument behind this stock.

In fact, I think many of the bullish arguments supporting holding this stock at current levels still make sense, for investors looking to hold for the very long-term.

Here’s why I think Nio is an EV stock investors may want to think about, and research independently. Undoubtedly, this is a difficult stock to value, given its growth potential and headwinds (such as increased competition). But it’s also one that I think could swing wildly in either direction, making it an intriguing stock to follow moving forward.

Forseven and NIO Stock

After the Gulf Nation invested $2.2 billion in the Chinese EV maker, Nio handed technology licenses to Abu Dhabi’s CYVN state investment arm, Forseven Company. The deal, which includes a fixed upfront license fee and royalties from Forseven’s future product sales, gave Nio’s stock a 2.4% boost.

In a global world for EV development, Nio is thinking outside the box, with some rather intriguing partners and target markets other Chinese competitors aren’t pursuing.

Notably, JPMorgan Chase (NYSE:JPM) analysts have adjusted their price target on NIO stock to $5 per share, even with a 36% fall in 2024. These analysts argued that this dip was due to a weak January and intense competition.

The English luxury EV company Forseven has purchased the bulk of Gordon Murray, a supercar maker. It was to combine Nio’s technology with Murray’s iStream production process. With Arab investors backing the entire thing, the deal’s success is hinged on the actual sales instead of the licensing revenue.

Battery Swapping Made Better

Through its participation in a Danish pilot program, Nio’s battery swap stations helped maintain grid stability by discharging during times of high demand. NIO senior vice president Shen Fei revealed this on Weibo. NIO runs 39 European swap stations and intends to open more in China. Each station has the potential to bring in bagfuls of revenue.

Shen pointed out the potential revenue generation through European grid frequency regulation services. Plus, the standout impact of NIO’s battery swap model on grid infrastructure and renewable energy integration. Battery swap stations control frequency and peak loads to stabilize grids.

Shen discussed how Nio is involved in grid load regulation and estimated considerable electricity cost savings. He also pointed out how difficult it is to explain the benefits of frequency regulation services to EV consumers. Shen looks to China’s Nio battery swap stations to provide grid services.

NIO is Now Cheaper and More Attractive Today

Looking closely at the company’s price-to-sales ratio, Nio appears to be one of the best-valued stocks in the EV sector. Compared to other high-flying names in this space, particularly U.S.-based companies with greater financial backing, Nio is certainly relatively attractive.

The company’s recent underperformance certainly raises concerns for momentum investors and traders. However, this dip could be the entry point long-term investors have been waiting for, if the company can indeed scale its production and profitability over time.

We’ll see, and I do think investors will have to wait some time to see who comes out ahead. I think this space is too competitive, particularly within China. Thus, I’m on the sidelines for now.

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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