Is NIO Stock Still a Good Buy After 31% Gain in the Past 3 Months?

NIO stock has experienced a notable 30.7% increase in just the last three months. This significant rise is largely attributed to the success of the launch of the ONVO L90 model on July 31, 2025, which saw more than 4,000 units delivered in the first 10 days, with the company targeting over 10,000 units in August. But with such impressive gains, investors are left wondering: Is NIO stock still a good buy?

This article delves into the company’s recent developments, sales projections, challenges, and the factors impacting its growth. It will provide you with a comprehensive outlook on whether now is the right time to invest in NIO stock or if the stock’s rally has already peaked.

NIO’s Recent Performance: An Overview

NIO has made significant strides in recent months, with the launch of the ONVO L90 sparking optimism in the market. The electric vehicle (EV) manufacturer has been able to capture attention with impressive sales numbers, but the road ahead is filled with challenges that may affect its future growth.

The company’s projected 2025 sales growth of 48.2% and earnings growth of 30.5% paint a positive picture. However, NIO’s debt situation is a concern for many investors. With a long-term debt to capital ratio of 0.76, significantly higher than the industry’s 0.28, NIO’s financial stability may be at risk, especially as its cash reserves have shrunk from RMB 19.3 billion in December 2024 to just RMB 8.1 billion in March 2025.

While the company is making strides with cost-cutting initiatives, including a 15% reduction in R&D expenses, there are concerns that these measures may hurt innovation and future product development.

Growth Potential: Is NIO on Track to Meet Its Targets?

NIO’s outlook for Q4 2025 is promising, with the company aiming for breakeven through its restructuring plans. The target of reducing non-GAAP SG&A expenses to below 10% of revenues in the fourth quarter, alongside a lower R&D budget of RMB 2-2.5 billion, demonstrates its commitment to improving profitability.

Despite the financial challenges, the ONVO L90 launch indicates a strong demand for NIO’s products. The vehicle margin for the ONVO brand is expected to be 15% in 2025, though this is still lower than the 20% margin projected for NIO’s main brand. The gross margin driver for the ONVO model is also not expected to appear until Q3 2025, which could put pressure on NIO’s ability to maintain profitability in the short term.

The 48.2% sales growth for 2025 is undoubtedly encouraging, but this must be balanced against the company’s current financial standing and the time it takes to stabilize its margins.

The Risks: What Challenges Should Investors Consider?

Despite the promising growth projections, there are key risks that need to be addressed before deciding to invest in NIO stock.

1. High Debt Load: NIO’s long-term debt to capital ratio is considerably higher than its competitors. The company must manage its debt carefully to avoid future financial troubles, especially with shrinking cash reserves.
2. Cash Flow Issues: A decrease in cash reserves from RMB 19.3 billion to RMB 8.1 billion raises red flags about NIO’s liquidity and its ability to fund operations and growth initiatives.
3. Profitability Concerns: The ONVO L90’s lower margins and the delay in the anticipated gross margin driver for the new vehicle suggest that profitability may not be as high as expected in the near future.

Should You Buy NIO Stock Now?

Given the current market conditions, the decision to buy NIO stock depends on your investment strategy and risk tolerance. For long-term investors, NIO’s growth potential and commitment to cost-cutting initiatives may present an attractive opportunity, especially if the company successfully reaches breakeven in Q4 2025 and improves its margins.

However, short-term investors should be cautious, as the company faces several financial hurdles. The high debt load, combined with shrinking cash reserves, could limit the stock’s upside potential in the near term. NIO’s stock may face volatility if the company does not hit its margin targets or if it struggles to maintain profitability.

Conclusion

NIO’s stock has experienced an impressive 30.7% gain, but several challenges must be addressed for the company to maintain its growth. Investors must weigh the risks, particularly NIO’s high debt levels and shrinking cash reserves, against the promising sales projections and cost-cutting strategies. While the company’s 48.2% sales growth forecast is encouraging, potential investors should consider the long-term financial stability of NIO before making any decisions.

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Disclaimer:

This is for information only, not financial advice. Always do your research.