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Good news for Nio (NYSE: NIO) shareholders! For three long months, investment bank J.P. Morgan said the Chinese electric vehicle (EV) maker’s stock was a sell.

But no longer.

On Wednesday, the bank’s investment firm relented and removed its sell rating from Nio, upgrading the EV stock to neutral and setting its price target at $5.40 per share. That price implies an upside of just 2% on the current $5.32.

Is Nio stock a buy?

Remember, JPMorgan isn’t saying Nio stock is a buy here. And it shouldn’t because Nio isn’t.

Valued at $12 billion, Nio lost nearly 25% of its own market cap last year. It’s also burning through its $2.1 billion in net cash at the rate of $2.2 billion per year. And analysts polled by S&P Global Market Intelligence predict the company will burn $2.3 billion in cash this year as the price war among electric car manufacturers in China continues to rage, even as consumer enthusiasm for EVs wanes.

So all is not well at Nio.

That said, J.P. Morgan notes that China’s government is sponsoring new “stimulus policies” designed to boost demand for EVs, and this will provide a tailwind to Nio’s business. At the same time, the company is enjoying some success with its “battery as a service” business model, cutting prices by 25% and more than doubling subscribers signing up for the service. Whether this suffices to turn Nio profitable remains to be seen. But it should at least boost sales if more car shoppers choose Nio EVs as a way to get into the program. That alone could attract buyers to the stock, making it riskier to short.

With Nio not expected to become profitable before 2027 and probably turning net cash-negative in 2025, the stock looks even riskier to own. I won’t be buying Nio shares. Still, J.P. Morgan is probably right: Down 28% in the past year, and underperforming the S&P 500 by more than 50 points, most of the near-term gains from shorting Nio stock have likely already been made.

Should you invest $1,000 in Nio right now?

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Nio, and S&P Global. The Motley Fool has a disclosure policy.

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