Nio stock outlook as shares near multi-year low after JPM downgrade

Chinese electric vehicle company NIO (NYSE:NIO) saw its shares fall a further 2% Thursday, adding to its recent decline, which has seen the stock tumble towards lows not seen since 2020.

Why Nio stock is falling (near 4-year lows)

Despite a push higher in 2023 until August, the electric vehicle maker has struggled to see any upside due to various headwinds impacting the business, including supply issues and demand concerns.

In recent days, the weak production forecasts for other electric vehicle companies have also weighed on the stock.

Back in November, Nio announced plans to cut 10% of its workforce amid "fierce competition," while since late 2022, Tesla (NASDAQ:TSLA) has repeatedly cut prices in China, leading other manufacturers in the country to respond. This resulted in profit margins being squeezed.

Furthermore, the weakness in NIO's stock price can be attributed to the company's slow sales in January and concerns regarding the company's sales and earnings momentum in 2024 this year.

JPMorgan downgrades Nio stock

In a note focusing on the Chinese auto industry, JPMorgan analysts downgrade NIO to Underweight from Neutral on Friday, noting the low earnings visibility across the sector.

The bank explained that it sees downside to consensus volume/revenue estimates, while it noted that the lack of new models relative to peers may further weigh on its stock performance.

JPMorgan also highlighted that competition in the mass market may only intensify, "especially considering the number of new launches from peers such as XPeng (NYSE:XPEV), BYD (SZ:002594), Geely (OTC:GELYY) (Galaxy and Zeekr brands) and Great Wall."

Nio stock forecast

Looking ahead, JPMorgan sees NIO shares hitting $5 per share after cutting the price target from $8.50 in the note.

"For 2024, our revised revenue forecast (Rmb73bn) is about 10% below Street consensus, as per Bloomberg," the bank stated. "This implies that the Street's sales volume forecast would be around 220-240K units, higher than our 191K units."

Meanfirm's Morgan Stanley said in a recent note that they remain Overweight on NIO and see it reaching $13 per share.

The investment bank believes execution still holds the key to turning the tide for the stock.

"Investors are likely to pay close attention to how NIO leverages the upsized sales team to regain growth impetus during a window period in 1H24 before the launch of its sub-brand ALPS in 2H24," stated the firm. "Battery swapping and NOP+ADAS development will also be key focus areas in 2024."