NIO stock has 22% upside, so why are investors still staying away?

NIO stock slipped after the Chinese electric-vehicle maker reported a quarter that looked strong enough to win over sceptics.

The company posted its second straight quarter of adjusted profitability, revenue more than doubled from a year earlier, and deliveries nearly doubled.

Yet the stock still struggled as investors looked past the headline improvement and focused on a harder question: can NIO keep this going?

That tension explains why analysts still see upside in the shares, while the market remains reluctant to fully believe the turnaround story.

NIO stock: Numbers that should have moved the needle

NIO’s first-quarter report gave bulls plenty to work with.

Vehicle deliveries rose 98.3% year on year to 83,465 units, while total revenue jumped 112.2% to RMB25.5 billion, or about US$3.7 billion (approx. $5.2 billion).

Vehicle margin improved to 18.8%, up sharply from 10.2% a year earlier and slightly above the 18.1% posted in the fourth quarter.

That matters because margins have long been the weak spot in the NIO story.

The company has had a loyal brand, sleek products and a battery-swapping network that sets it apart, but it has also burned cash for years.

In Q1, the picture looked cleaner. NIO reported adjusted operating profit of RMB66.8 million and adjusted net profit of RMB43.5 million, even though it still posted a loss under standard accounting rules.

Chief Executive William Li said the all-new ES8 ranked first in China’s large SUV segment and in the passenger-vehicle segment priced above RMB400,000 for five straight months through April.

He also said ES9 test drives had not hurt ES8 demand; instead, ES8 orders rose 30% week on week after ES9 test drives began.

That is why several analysts remain constructive.

Citi’s Jeff Chung lifted his US-listed NIO target to $8.20 from $7.60 and kept a Buy rating after the results. BofA Securities raised its target to $6.80 from $6.70, though it kept a Neutral rating.

Based on the stock’s post-results level near $5.60, even BofA’s cautious target implied roughly 20% to 22% upside.

So what is spooking the market?

The concern is not that Q1 was weak, but it may be difficult to repeat.

Stanley Qu, NIO’s chief financial officer, warned that rising costs for memory chips, lithium carbonate, battery materials, copper and aluminium could add more than RMB10,000 in average cost per vehicle from the second quarter onward.

For a company still proving its profitability, that is a real overhang.

There is also delivery volatility. NIO delivered 29,356 vehicles in April, up 22.8% from a year earlier, but down from March’s 35,486 vehicles.

That month-on-month cooling raised the question investors keep coming back to: was the first quarter a sustainable base, or did it benefit from a temporary product-cycle lift?

Then there is ONVO, NIO’s family-focused sub-brand.

Management has been candid that ONVO still needs stronger brand awareness, even as it expands its lineup.

For investors, that means NIO is not just trying to sell more cars, but build three brands at once: NIO, ONVO and Firefly in one of the world’s toughest EV markets.

BofA’s stance captures the caution.

The bank raised its numbers after the quarter, but said NIO’s stronger model pipeline and cost controls are partly offset by sector headwinds, including lower EV subsidies and cost inflation in batteries, memory and metals.