BofA Cuts NIO Price Target as Q2 Earnings Miss on Rising Costs, Margins Under Pressure
NIO missed second-quarter 2026 earnings expectations due to higher-than-anticipated operating expenses and non-operating losses, prompting Bank of America Securities to slash its price target on the Chinese electric vehicle maker, according to a newly published analyst note. The bank maintained its Neutral rating on the stock while flagging ongoing margin headwinds from raw material cost inflation and reduced government subsidies.
According to BofA Global Research's report published on September 1, 2026, authored by analyst Ming Hsun Lee, CFA, and colleagues at Merrill Lynch (Hong Kong) and Merrill Lynch (Singapore), the investment bank has revised down its price objective on NIO's American Depositary Shares to USD 5.20 from USD 6.00, and cut its Hong Kong share target to HKD 40 from HKD 47.
NIO reported second-quarter 2026 total revenue of RMB 32.1 billion (approximately US$4.4 billion), representing year-over-year growth of 69% and broadly in line with analyst forecasts. The strong top-line performance was underpinned by a 50% year-over-year increase in vehicle delivery volumes and a roughly 20% rise in average selling prices compared to the same period a year ago. Overall gross margin improved sharply on an annual basis, reaching 18.4%, up 8.4 percentage points year-over-year, though it came in slightly below BofA's estimate of 18.6%.
Despite the revenue beat, the bottom line disappointed. Non-GAAP net profit came in at just RMB 25 million for the quarter, down from RMB 45 million in the prior quarter and well below BofA's forecast of RMB 468 million. The shortfall was primarily attributed to an operating expense-to-sales ratio of 19.5%, exceeding the bank's estimate of 18.1%. Raw material cost inflation added approximately RMB 14,000 per vehicle in production costs during the quarter compared to end-2025 levels, further compressing profitability.
Across its three brand portfolio — NIO, ONVO, and Firefly — management highlighted encouraging demand signals. The flagship ES8 model reached 11,000 monthly shipments in August 2026, with cumulative deliveries surpassing 140,000 units over the past 11 months. The ES9 has maintained a three-to-four month order backlog since May, with approximately 75% of buyers identified as new customers, suggesting the brand is successfully expanding its addressable market. The ONVO sub-brand delivered both volume and average selling price growth in the first half of 2026, with average transaction prices reaching RMB 240,000.
For the third quarter of 2026, NIO guided for vehicle deliveries of 108,000 to 111,000 units, representing year-over-year growth of approximately 24% to 27.5%. Total revenue guidance for the period was set at RMB 33.3 billion to RMB 34.1 billion. Management indicated it expects continued raw material cost pressure of RMB 2,000 to RMB 3,000 per vehicle in the second half of 2026, while targeting stable vehicle-level gross margins relative to the second quarter.
On the infrastructure front, NIO launched its fifth-generation battery swap station in August 2026, coinciding with the deployment of its 4,000th swap station, with initial rollout across seven cities. The new generation supports all three of NIO's vehicle brands and reduces per-station costs by approximately RMB 100,000 to RMB 1.4 million, excluding batteries and high-voltage equipment. The company plans to add 1,000 additional battery swap stations in 2026 under its partner-funded Power Partner program, with 2026 capital expenditure guidance of RMB 6 billion to RMB 7 billion, broadly flat year-over-year.
In response to the earnings miss and revised guidance, BofA materially lowered its forward estimates. The bank cut its 2026, 2027, and 2028 sales volume forecasts by approximately 8%, 12%, and 10% respectively, and reduced gross margin estimates across all three years. As a result, non-GAAP net profit estimates were slashed by 52% for 2026, 54% for 2027, and 27% for 2028. The bank now projects NIO's adjusted net profit attributable to shareholders at RMB 1.14 billion for full-year 2026, recovering to RMB 1.66 billion in 2027 and RMB 3.63 billion in 2028.
BofA's revised price objective of USD 5.20 per ADS was derived using an equal blend of a discounted cash flow model — implying a fair value of USD 4.50 based on a weighted average cost of capital of 13.6% — and an EV/sales multiple approach yielding USD 5.80, applying a 0.6x forward EV/sales multiple that sits one standard deviation below NIO's historical average since its IPO.
The Neutral rating reflects a balance of competing forces. BofA acknowledged NIO's strong model pipeline heading into 2027, including refreshed versions of the ES6, ET5, and ET5T, a new lower-priced ONVO model, and continued Firefly development. However, these positives are seen as partially offset by the reduction in EV purchase subsidies, persistent raw material inflation, and elevated operating expenses tied to ongoing marketing campaigns and new model launches. With the stock trading at USD 4.23 — near its 52-week low — the implied upside to BofA's revised target remains approximately 23%, but the bank's cautious stance suggests investors should await clearer evidence of margin stabilization before turning more constructive on the name.
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