Morgan Stanley reiterates overweight rating on NIO stock

On Tuesday, Morgan Stanley (NYSE:MS) analysts reiterated an Overweight rating on NIO stock with a price target of $5.90. The Chinese EV maker, currently valued at $7.89 billion, has shown significant price volatility with a beta of 1.58, according to InvestingPro data. The analysts reviewed the company’s first-quarter performance, noting a 39% decline in overall revenue quarter-over-quarter, although revenue increased 21% year-over-year to Rmb12 billion. This figure fell short of the company’s guidance range of Rmb12.4-12.9 billion. InvestingPro data shows the company maintaining an 18.18% revenue growth over the last twelve months, despite challenging market conditions.

The analysts observed a 2.9 percentage point decline in vehicle gross margin quarter-over-quarter, while it rose 1.0 percentage point year-over-year to 10.2%. This change was attributed to an inferior scale and an unfavorable product mix, with higher sales of the Onvo model. Overall gross profit margin decreased by 4.1 percentage points quarter-over-quarter to 7.6%, which was below Morgan Stanley’s estimate of 8-9%. The current gross margin stands at 9.88%, reflecting ongoing profitability challenges that InvestingPro subscribers can track through comprehensive financial health scores and additional ProTips. Operating expenses decreased quarter-over-quarter, with research and development falling 12% and selling, general, and administrative expenses down 10%, reflecting cost savings from restructuring.

NIO’s cash balance, including restricted cash, short-term investments, and long-term deposits, fell Rmb16 billion quarter-over-quarter to Rmb26 billion. The analysts noted that this marks the trough and is likely to improve from the second quarter along with a sales recovery.

Looking ahead to the second quarter, NIO provided revenue guidance of Rmb19.5-20.1 billion, representing a 62-67% increase quarter-over-quarter. This suggests a high single-digit sequential decline in average selling price, likely due to increasing discounts ahead of the 5/6-series facelifts in May and a rise in the mix of the Firefly brand.

The focus remains on a resurgence in sales volume and cash flow improvements as the company navigates these financial dynamics. Based on InvestingPro’s Fair Value analysis, NIO currently appears undervalued, though investors should note that the company is quickly burning through cash and faces profitability challenges. For deeper insights, including 12 additional ProTips and comprehensive valuation metrics, explore the full NIO analysis on InvestingPro.

In other recent news, NIO Inc (NYSE:NIO). released its unaudited financial results for the first quarter of 2025, although specific revenue and net income figures were not disclosed. The company reported delivering 23,900 vehicles in April 2025, marking a 53% year-on-year increase in deliveries. This growth indicates NIO’s expanding market presence in the electric vehicle sector. Citi maintained a Buy rating on NIO’s stock with a price target of $8.10, expecting the introduction of new models and cost-saving synergies. The firm anticipates a potential increase in deliveries, projecting up to 150,000 units in the fourth quarter of 2025. Meanwhile, NIO’s ONVO brand saw a 43% month-on-month increase in volumes, despite a 32% drop for the NIO brand itself. In the broader market, Chinese stocks, including NIO, faced declines amid escalating trade tensions between the U.S. and China. As a response, Chinese officials are reportedly considering measures to stabilize their markets.

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