Should You Buy Nio While It's Below $7?

Chinese EV manufacturer Nio (NIO) has seen its stock drop 13% recently, now trading below $7, despite having more than doubled from its five-year lows. While the company reported a 92.6% year-over-year increase in October deliveries, its international expansion, particularly in Europe, faces significant headwinds with declining sales and tariff challenges. Nio has consistently grown revenue but remains unprofitable, with losses widening to $3 billion in 2024 due to its low-cost vehicle strategy. However, recent sequential improvements in net losses and margins in 2025 suggest a potential turnaround, with the company targeting its first profitable quarter in Q4 this year, making its upcoming Q3 earnings report a critical indicator for this high-risk, high-reward EV growth stock.

Analysis

Nio's stock has recently experienced a 13% decline, trading below $7, despite having more than doubled from its five-year lows, indicating significant market volatility. Domestically, the company demonstrated robust performance with October deliveries surging 92.6% year-over-year to 40,397 vehicles, solidifying its primary revenue source. However, its international expansion faces considerable headwinds, with European sales plummeting from a peak of 2,365 vehicles in 2023 to just 833 year-to-date, exacerbated by European tariffs and high software validation costs.

Despite a 300% revenue growth over the past five years, Nio has consistently remained unprofitable, with net losses widening to $3 billion in 2024 due to its strategic focus on low-cost vehicles. Encouragingly, 2025 has shown a positive shift, with sequential improvements in both shrinking net losses and improving quarterly margins. The company has publicly targeted achieving its first profitable quarter in Q4 this year, a crucial milestone for investor confidence and market perception.

The upcoming Q3 earnings report will be pivotal in assessing Nio's progress towards its profitability goals and validating its turnaround narrative. While the stock is inherently risky, its current sub-$7 valuation is considered to reflect this risk, potentially offering a compelling entry point for risk-tolerant investors. The success of new sub-brands like Firefly and Onvo, particularly the best-selling L90 SUV, will be instrumental in achieving the economies of scale necessary to counteract margin compression and drive future growth.

Key Decisions for Investors

• Investors should closely scrutinize Nio's upcoming Q3 earnings report for continued sequential improvements in net losses and quarterly margins, which are critical indicators of its path to profitability
• Evaluate the effectiveness of Nio's international expansion, particularly its ability to reverse declining European sales and mitigate tariff impacts
• Consider Nio as a high-risk, high-reward growth opportunity within the EV sector, best suited for portfolios with a higher tolerance for volatility