Nio Inc (NYSE: NIO) has been in a sharp uptrend over the past four months but a senior Morgan Stanley analyst believes the EV stock could still rip much higher from current levels.
In his latest research note, Tim Hsiao reiterated his “overweight” rating on NIO shares and raised his price target to $6.50 – indicating potential upside of nearly 30% on its previous close.
Despite profitability concerns, Nio stock is currently trading at $5.40 a share, which translates to up roughly 70% versus its year-to-date low in the first week of April.
Onvo L90 launch remains a tailwind for Nio stock
Tim Hsiao now expects NIO’s volume to come in about 9.0% shy of his previous estimate in 2025 because its performance in the first six months of the year hasn’t been particularly encouraging.
However, the analyst left his volume estimates for the next two years largely unchanged at 470K and 686K units, respectively.
In his report, Hsiao argued that the recently launched Onvo L90 will boost volume recovery in 2026.
He expects the electric SUV to grow the company’s gross margin by 0.2 percentage points in the coming year as well.
Note that the first batch of Onvo L90 sold out within three hours on July 31st.
Despite NIO shares’ outperformance in recent months, they’re down some 25% versus their 52-week high at the time of writing.
NIO shares could benefit from unique business model
Morgan Stanley expects NIO’s commitment to lowering its global headcount as part of a broader restructuring effort to help boost the EV stock as well.
In fact, the investment firm lowered its estimate for the electric vehicle maker’s full-year operating expenses by 10% in its report this week.
Nio stock may shine in the long run also because the Shanghai-headquartered firm has taken a rather unique approach toward electric vehicles.
Instead of conventional battery charging, it has set up battery swapping stations where NIO drivers can simply switch their depleted batteries for fresh ones.
The process takes roughly 5 minutes only – essentially making it a better EV alternative to gas-powered vehicles.
That’s partly why Tim Hsiao, in the best-case scenario, even sees NIO shares surpassing $10 over the next 12 months.
Should you load up on this EV stock today?
Investors should consider loading up on NIO stock at current levels for EV exposure, also because it’s trading at a price-to-sales (P/S) ratio of 1.18 only at the time of writing.
So, its multiple is currently far below that of Tesla Inc. and even Rivian that is going for nearly 3.0 on Thursday.
All in all, Nio’s innovative battery as a service (BaaS) model, restructuring efforts, and favourable valuation have Morgan Stanley bullish, with Tim Hsiao projecting another 30% upside – making the EV stock a compelling buy despite near-term volume headwinds.
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