NIO: Future Chip Licensing Revenue Will Support Upside Despite Softer Delivery Outlook

Analysts have trimmed their price target on NIO modestly, reflecting a slightly lower fair value estimate of about $6.75 per share, down from roughly $6.83, as they factor in weaker near term volume guidance, softer 2026 demand expectations, more intense competition, and a sharply higher implied future P E multiple amid pressured margin assumptions.

Analyst Commentary

Street research on NIO has turned more cautious overall, with several recent target cuts and rating downgrades offsetting earlier optimism tied to new models and improving orders.

Bullish Takeaways

• Bullish analysts still see upside from NIO's expanding model lineup and prior evidence of strong demand for higher end vehicles, which they believe can support volume growth once macro and subsidy headwinds normalize.
• Previous price target increases were anchored in expectations for improving margins as production ramps and product mix stabilizes, supporting a case for gradual earnings leverage even from a lower base.
• Some forecasts assume that broader recovery in China's new energy vehicle market can re accelerate order momentum and help justify current valuation multiples despite recent volatility.

Bearish Takeaways

• Bearish analysts highlight NIO's weaker than expected Q4 delivery guidance, including a step down from prior targets and softer order trends, as a key reason to rein in growth assumptions and cut price targets.
• Concerns about slower demand into 2026, exacerbated by the phase out of government subsidies and a gap before the next major model launches, have led to lower volume and revenue estimates.
• More intense competition in China's EV market, particularly in NIO's core price segments, is seen as pressuring pricing power and limiting the pace of margin recovery, which weighs on fair value assessments.
• With visibility into early 2025 sales still low and execution risk rising, some models now embed a higher risk premium, supporting more neutral stances on the shares despite the pullback from prior highs.

What's in the News

• NIO began licensing its in house Shenji NX9031 automotive chip technology to an external auto chipmaker, opening a new high margin revenue stream with potential orders reportedly reaching hundreds of millions of RMB (CnEVPost)
• Third quarter 2025 vehicle deliveries rose to 87,071 units, up 40.8% year over year and 20.8% sequentially, driven by contributions from the NIO, ONVO, and FIREFLY brands (company announcement)
• The company issued fourth quarter 2025 guidance calling for 120,000 to 125,000 vehicle deliveries and revenue growth of more than 65% versus the prior year period, which the company stated reflects confidence in sustained volume momentum (company guidance)
• NIO completed a follow on equity offering totaling about $1.01 billion, issuing additional ADSs and Class A shares that bolster its balance sheet but also increase share count (company filing)
• Large lock up agreements on both Class A and Class C ordinary shares are scheduled to expire on December 10, 2025, introducing potential for increased share supply in the market (company filing)

Valuation Changes

• Fair Value Estimate has edged down slightly, from about $6.83 per share to roughly $6.75, reflecting modestly weaker growth and margin assumptions.
• Discount Rate has risen slightly, from approximately 12.37% to about 12.47%, implying a marginally higher required return and risk premium.
• Revenue Growth has been trimmed modestly, with the long term growth assumption reduced from around 30.36% to about 29.57%.
• Net Profit Margin has been cut significantly, from roughly 4.91% to below 1.00%, indicating a more cautious outlook on medium term profitability.
• Future P/E has increased sharply, from about 20.5x to roughly 143.0x, as lower profit expectations raise the implied multiple on projected earnings.