NIO’s Onvo unlikely to turn around company’s lack of profitability – analyst

The NIO (NYSE:NIO) Onvo L60 is the company’s answer to the Tesla (TSLA) Model Y with a more affordable sticker price and battery-swapping capability. Unfortunately, the buzz surrounding the new offering from the Chinese carmaker is unlikely to translate into a quicker path to profitability, says Goldman Sachs’ Tina Hou, as increased sales and marketing expenses, elevated research and development costs, and intense competition in Q1 2025 will continue to drag down operating losses.

Hou downgraded NIO (NIO) to Sell from Neutral, as the limited new model pipeline from the company and slow production ramp-up for Onvo positions the company unfavorably in 2025.

“We are Sell-rated, and expect lukewarm order momentum, slow production ramp-up and delivery volume, and intensifying price competition to be downside stock price catalysts,” Hou said in Monday’s research note.

The street’s consensus for 2025 non-GAAP loss is underestimating the expanded operating expenses that will be required to open 300-500 Onvo stores, Hou says, and the added personnel to each store will not necessarily translate into increased sales volume. In the near term, there is also downside risk to the company’s Q4 volume and revenue guidance, as November weekly volume is tracking at 4.8K units vs. guidance implied weekly run rate of 5.9K units into the remaining 6-and-a-half weeks of 2024.

In addition to a bearish shift on the company, Hou lowered her price target on NIO (NIO) by 18.7% to $3.90, a 20% downside to Friday’s close.

NIO (NIO) shares are down 1.2% in Monday’s premarket trading.