Bearish coverage of Nio (NYSE:NIO) only seems to be increasing. The Chinese electric vehicle (EV) producer is falling out of favor with Wall Street at an alarming pace as shares continue declining. Most recently, analyst Eunice Lee of AB Bernstein reiterated a “hold” rating for NIO stock and lowered her price target from $7.50 to $5.50. Shares are currently trading at $5.64, but if this sentiment continues, they will likely drop even further.
It’s true that Nio recently reported weaker-than-expected earnings for the fourth quarter of 2024. But experts seem convinced that the company’s problems run deeper than failing to meet expectations. Several analysts have slashed their price targets on NIO stock during the past week. This suggests that darker days lie ahead as the struggling company prepares to continue navigating a domestic market wrought with competition and an international one that isn’t always friendly toward Chinese EV makers.
Why Does Wall Street Hate NIO Stock?
As noted, Bernstein is far from the only Wall Street institution to slash its NIO stock price targets. Barclays analyst Jiong Shao recently issued a $5 price prediction, maintaining an “equal weight” rating. Meanwhile, Tina Hou of Goldman Sachs maintained a “hold” rating and lowered her price target from $8.40 to $7.40. That may be bullish relative to NIO’s current share prices, but it still represents an overall negative sentiment toward the stock. Two weeks ago, JPMorgan Chase analysts also issued a $5 price target and downgraded shares to an “underweight” rating.
Things didn’t always look so grim for Nio. It’s not hard to remember the days when experts touted it as a likely winner of the booming Chinese EV market. But NIO stock has spent the past year progressively trending downward as its weak fundamentals scared away prospective investors. Now, things only seem to be getting worse as problems with its growth strategy are creating new levels of uncertainty. As InvestorPlace‘s Louis Navellier notes:
“In order to stay competitive and potentially increase the company’s EV sales, Nio might consider an aggressive price-reduction strategy. The last thing Nio needs to do now, really, would be to focus on building unaffordable vehicles.
Yet, Nio unveiled a super-car, called the EP9, with a price tag of $3 million. No, that’s not a misprint. We checked several different sources, and they all confirm the absurd $3 million price of the EP9.”
The company could be taking steps to usher in a much-needed turnaround, but it has opted to do the opposite. That should worry investors, as it is clearly worrying Wall Street.
Nio’s Uphill Battle
It’s impossible to ignore the fact that Nio is fighting an uphill battle against bigger, better opponents. BYD Company (OTCMKTS:BYDDY) still dominates China’s EV market, and despite having problems of its own, Tesla (NASDAQ:TSLA) remains an ever-present threat.
Nio isn’t well equipped to compete for a share of the nation’s luxury EV market with a $3 million supercar. It should be heeding Navellier’s advice and cranking out affordable EVs for the many Chinese drivers who can’t afford to spend $3 million on a single car. Wall Street has clearly recognized the folly of Nio’s growth plan and is quickly adjusting its NIO stock price targets accordingly.
On the date of publication, Samuel O’Brient 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.
