J.P. Morgan maintains NIO at Overweight with a US$7.00 target price

Overview

This report is a company research and outlook forecast report on NIO by J.P. Morgan. The core view is that NIO's 1Q26 results significantly exceeded J.P. Morgan's and the market's expectations, and non-GAAP profitability was positive for a second consecutive quarter, mainly driven by a higher mix of premium ES8 models, sales growth, lower operating expense ratios, and improved organizational efficiency. The report maintains an Overweight rating on NIO and sets a December 2026 target price of US$7.00.

Core views

J.P. Morgan believes the ONVO L80 and ES9/ES8 will be the key models driving NIO's future sales and profitability improvement. The report expects FY26 sales of about 451,000 units, up 38% year over year; as the product mix continues to optimize, volumes ramp, and cost control progresses, NIO's profitability in 2026 and beyond should improve meaningfully. The report also notes that rising industry raw-material costs could create pressure of about RMB10,000 per vehicle, but NIO may offset margin pressure through stable pricing, reduced promotions, and 5%-10% cost savings from supply chain management.

Analysis framework

The report analyzes results review, management guidance, product cycle, model mix, cost and expense ratios, ADAS technology progress, and peer valuation comparison. On valuation, the target price is based on a blended average of 0.9x FY26E P/S and 0.6x FY26E EV/Sales, with reference to business similarity, operating opportunities, and product pipelines among peers such as XPeng and Li Auto.

Methodology notes

• Valuation methodsBlended P/S and EV/Sales valuation

  Derive the target price using the blended average of 0.9x FY26E P/S and 0.6x FY26E EV/Sales.

  This method combines revenue scale and enterprise value, and compares NIO with other new energy vehicle peers such as XPeng and Li Auto. The report believes the multiples used are below the average level for EV startups and are not aggressive.

• fundamental analysisProduct mix and operating leverage analysis

  Assess the profitability recovery path through the share of high-margin models, volume ramp, and changes in expense ratios.

  The report emphasizes that the ES8 contributes about half of deliveries and has a vehicle gross margin above 20%, while SG&A and R&D expense ratios have declined significantly, indicating improved operating leverage.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• NIO Inc.

  core coverage name

  Strengths

  1Q26 results beat expectations, with consecutive non-GAAP profitability; the high-margin ES8 accounts for a large share of deliveries; new models such as ONVO L80, ES9, and ES8 may support sales growth; improving expense ratios reflect operating leverage.

  Weaknesses

  It still faces rising industry raw-material costs, promotional pressure, and intensifying competition in the NEV market; profitability recovery depends on the successful ramp of premium models and new brand models.

  Comparison

  Valuation multiples are benchmarked against XPeng and Li Auto, and are below the 1.0x FY26E P/S and 0.8x FY26E EV/Sales averages for EV startups.

  Risks

  Lower-than-expected execution and deliveries for new models, weaker overall auto market or EV demand, and increased pressure from competitors in the same price range.

• ONVO L80

  sales growth driver

  Strengths

  Its five-seat SUV positioning addresses a larger potential market, with the report saying its target market size is about three times that of the three-row-seat segment.

  Weaknesses

  Order conversion, delivery ramp, and brand positioning still need to be validated.

  Comparison

  Compared with the current ES8/ES9-dominated phase, the ONVO L80 could expand NIO's reach into a larger SUV demand pool.

  Risks

  If market acceptance or production ramp falls short of expectations, the FY26 sales growth assumption could come under pressure.

• ADAS and NX9031 chip

  long-term revenue and technology differentiation factor

  Strengths

  The self-developed 5nm NX9031 chip is expected to ship more than 250,000 units and cover 80%-85% of delivered vehicles in 2H26; subscription-based ADAS is reiterated as a long-term revenue driver.

  Weaknesses

  Short-term financial contribution still needs to be validated by subscription penetration and users' willingness to pay.

  Comparison

  The report says the new world model and closed-loop reinforcement learning architecture achieved a 92% quarter-over-quarter increase in city NOP mileage with about 20% of peer cloud compute capacity.

  Risks

  Technology upgrades, the regulatory environment, user acceptance, and peer smart-driving competition may all affect the pace of monetization.

Key data

• Current priceUS$5.59As of May 20, 2026.
• Target priceUS$7.00December 2026 target price.
• 1Q26 revenueRMB25.5 billionUp 112% year over year and down 26% quarter over quarter.
• 1Q26 deliveries83,000 unitsUp 98% year over year.
• 2Q26 delivery guidance110,000-115,000 unitsImplying sequential growth of 32%-37%.
• 1Q26 gross margin19.0%Up 11.4 percentage points year over year and 1.5 percentage points quarter over quarter.
• 1Q26 non-GAAP net profitRMB43 millionSecond consecutive quarter of adjusted profitability.
• FY26 sales forecastabout 451,000 unitsExpected to grow 38% year over year.

Impact & implications

The report is mildly positive for NIO's share price and fundamentals: in the short term, the 1Q26 earnings beat and the strong 2Q26 delivery guidance should help reinforce market confidence in sales growth and a profitability inflection point; in the medium term, volume growth from the ES8/ES9 and ONVO L80, product mix improvement, and the potential for ADAS subscription revenue may continue to improve revenue and margins. However, the investment case still depends on model execution, delivery pace, industry demand, and the competitive landscape.

Risks

• Vehicle execution and deliveries come in below expectations.
• Overall auto market sales or EV demand are weaker than expected.
• Competition intensifies among peers in the same price range, pressuring pricing and margins.
• Rising industry raw-material costs create a cost pressure of about RMB10,000 per vehicle.
• Order conversion or ramp-up for new models ES9, ES8, and ONVO L80 falls short of expectations.

What to watch

• Whether 2Q26 deliveries can reach the guided 110,000-115,000 units.
• Order performance after the ES9 launch and its spillover effect on ES8 orders.
• Sales ramp and gross margin performance after the ONVO L80 launch.
• Whether the share of premium models continues to support vehicle gross margin.
• Whether supply-chain savings and reduced promotions can offset pressure from rising raw-material costs.
• NX9031 chip installation rate and progress in ADAS subscription revenue.