NIO Shares Slump on Big Q4 Loss, Slowing Sales Due to Global Chip Shortage

Chinese electric vehicle maker NIO’s shares slumped 13% on Tuesday after the company’s loss far surpassed analysts’ expectations for the fourth quarter and warned the global chip shortage would slow the pace of EV deliveries in the first quarter.

The company, which designs, manufactures, and sells smart and connected premium electric vehicles, reported a fourth-quarter net loss of 1.49 billion yuan, way above Wall Street consensus estimates for a loss of 757 million yuan.

NIO’s reported a net loss per share of $1.05 for the fourth quarter, largely missing the market expectations for a loss of $0.16 per share. The firm said its revenue surged over 130% to $6.64 billion from the same period last year but came a little below analyst’s forecasts of $6.71 billion.

“NIO concluded a transformational 2020 with a new quarterly delivery record of 17,353 vehicles in the fourth quarter of 2020. The strong momentum has continued in 2021 as we achieved a historic monthly delivery of 7,225 vehicles in January and a resilient delivery of 5,578 vehicles in February, representing strong 352% and 689% year-over-year growth, respectively,” said William Bin Li, founder, chairman and chief executive officer of NIO.

“Supported by competitive product offerings, outstanding services and innovative business models, we have won increasing recognition from our users and expect to deliver 20,000 to 20,500 vehicles in the first quarter of 2021.”

However, that is slower than the 42% increase the Chinese electric vehicle maker reported between the third and the fourth quarter.

Following this, the U.S.-listed NIO shares, which surged over 1,100% in 2020, slumped 13% to $43.29 on Tuesday. However, it gained 1.6% to $43.98 in extended trading.

“We cut our DCF-based TP to USD91 from USD100 after factoring in our new earnings forecasts while our WACC assumption is unchanged. We reiterate our Buy rating on NIO as we see its technology as ahead of peers with strong sales volume growth ahead. The recent share-price retreat serves as a good entry point, in our view. Key downside risks: lower-than-expected sales volume and margin,” said Daiwa’s Kelvin Lau.

“Our 2021-2023E earnings are more conservative than the street likely as we are more cautious on its EBIT margin outlook. However, we are likely more positive on NIO’s long-run outlook.”

NIO Stock Price Forecast

Ten analysts who offered stock ratings for NIO in the last three months forecast the average price in 12 months of $68.26 with a high forecast of $80.30 and a low forecast of $54.00.

The average price target represents a 57.68% increase from the last price of $43.29. From those ten analysts, seven rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $60 with a high of $122 under a bull scenario and $42 under the worst-case scenario. The firm gave an “Overweight” rating on the Chinese electric vehicle makers’ stock.

Several other analysts have also updated their stock outlook. JPMorgan lowered their target price to $70 from $75. Jefferies set a hold rating and a $60 target price for the company. Nomura set a buy rating and $80.30 target price for the company.

Moreover, Nomura set a buy rating and $80.30 target price for the company. Bank of America boosted their price objective to $70 from $59 and gave the stock a buy rating.

Analyst Comments

“Solid 1Q volume guidance suggests the good trajectory of sales recovery post CNY, corroborating superior market recognition of NIO’s models and brand. The strong balance sheet can finance more aggressive channel expansion and technology investment. Tight component supply will likely cap 2Q sales upside,” said Tim Hsiao, equity analyst at Morgan Stanley.

“We expect higher long-term growth visibility from the software development BaaS initiative. Tesla’s success in China has also attracted fund flows for EV makers, which we think bodes well for NIO’s long-term R&D investment capability and growth potential. Proven scale benefits with continuous gross margin improvement.”

Upside and Downside Risks

Risks to Upside: 1) Progress in planned A-share listing. 2) Stronger-than-expected sales volume. 3) Better-than-expected improvements in operating efficiency- highlighted by Morgan Stanley.

Risks to Downside: 1) Weaker-than-expected sales volume. 2) Lack of signs of efficiency improvement. 3) Lower-than-expected NOP option take rate.

Check out FX Empire’s earnings calendar

Why NIO Stock Is Down By 8% Today?

NIO Video 02.03.21.

NIO Missed Analyst Estimates

Shares of NIO found themselves under significant pressure after the company released its fourth-quarter report.

NIO reported revenue of $1 billion and GAAP loss of $0.16 per share, missing analyst estimates on both earnings and revenue. The company stated that it delivered 17,353 vehicles in the fourth quarter. For the full year, deliveries of vehicles were 43,728 compared to 20,565 vehicles in 2019.

NIO added that it had already delivered 12,803 vehicles in the first two months of this year and expected that first-quarter deliveries would be between 20,000 and 20,500 vehicles. The company also expects that its revenue will grow to $1.1 billion in the first quarter.

Traders did not like the report and sold NIO shares which are down by about 8% in today’s trading session. The company missed analyst estimates while its delivery guidance was not aggressive enough for the market.

What’s Next For NIO?

It should be noted that NIO shares gained more than 1000% in just one year so the market expected strong results from the company. Currently, investors are willing to bet on almost any company that is focused on electric vehicles. As a result, such stocks followed Tesla‘s lead and gained strong upside momentum in 2020.

This year, investors will likely pay more attention to financial results, but it remains to be seen whether disappointing earnings reports will be able to put any long-term pressure on shares of electric vehicle companies like NIO.

Such companies often miss expectations on profits or deliveries, but the market is often ready to turn a blind eye to temporary problems. While NIO’s earnings report was not as strong as analysts expected, the company continues to grow at a healthy pace. In this light, its stock may soon find enough support from speculative traders and investors who are ready to establish positions in EV-related stocks after a pullback.

For a look at all of today’s economic events, check out our economic calendar.

US Stock Market Daily Recap: Worst for Stocks Over?

The way that bond yields have popped has weighed heavily on growth stocks. Outside of seeing a minor comeback on Friday (Feb. 26), the Nasdaq dropped almost 7% between February 12 and Friday’s (Feb. 26) close.

Other indices didn’t fare much better either.

The spike bond yields, however, in my view, are nothing more than a catalyst for stocks to cool off and an indicator of some medium to long-term concerns. But calling them a structural threat is a bit of an overstatement.

Rising bond yields are a blessing and a curse. On the one hand, bond investors see the economy reopening and heating up. On the other hand, with the Fed expected to let the GDP heat up without hiking rates, inflation may return.

I don’t care what Chairman Powell says about inflation targets this and that. He can’t expect to keep rates this low, buy bonds, permit money to be printed without a care, and have the economy not overheat.

He may not have a choice but to hike rates sooner than expected. If not this year, then in 2022. I no longer buy all that talk about keeping rates at 0% through 2023. It just can’t happen if bond yields keep popping like this.

So was the second half of February the start of the correction that I’ve been calling for? Or is this “downturn” already over?

Time will tell. While I still do not foresee a crash like we saw last March and feel that the wheels are in motion for a healthy 2021, I still maintain that some correction before the end of this month could happen.

Corrections are also healthy and normal market behavior, and we are long overdue for one. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017), and we haven’t seen one in almost a year.

A correction could also be an excellent buying opportunity for what could be a great second half of the year.

Pay attention to several things this week. The PMI composite, jobs data, and consumer credit levels will be announced this week.

We have more earnings on tap this week too. Monday (March 1), we have Nio (NIO) and Zoom (ZM), Tuesday (March 2) we have Target (TGT) and Sea Limited (SE), Wednesday (March 3), we have Okta (OKTA) and Snowflake (SNOW), and Thursday (March 3) we have Broadcom (AVGO).

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

The downturn we experienced to close out February could be the start of a short-term correction- or it may be a brief slowdown. A further downturn by the end of the month is very possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Nasdaq- a Buyable Slowdown?

Figure 1- Nasdaq Composite Index $COMP

The Nasdaq’s downturn was so overdue. Even though more pain could be on the horizon, I like the Nasdaq at this level for some buying opportunities.

If more losses come and the tech-heavy index dips below support at 13000, then it could be an even better buying opportunity. It can’t hurt to start nibbling now, though. If you waited for that perfect moment to start buying a year ago when it looked like the world was ending, you wouldn’t have gained as much as you could have.

Plus, if Cathie Wood, the guru of the ARK ETFs that have continuously outperformed, did a lot of buying the last two weeks, it’s safe to say she knows a thing or two about tech stocks and when to initiate positions. Bloomberg News ’ editor-in-chief emeritus Matthew A. Winkler wouldn’t have just named anyone the best stock picker of 2020.

Before February 12, I would always discuss the Nasdaq’s RSI and recommend watching out if it exceeds 70.

Now? As tracked by the Invesco QQQ ETF , the Nasdaq has plummeted almost 7% since February 12 and is closer to oversold than overbought. !

While rising bond yields are concerning for high-flying tech stocks, I, along with much of the investing world, was somewhat comforted by Chairman Powell’s testimony last week (even if I don’t totally buy into it). Inflation and rate hikes are definitely a long-term concern, but for now, if their inflation target isn’t met, who’s to fight the Fed?

Outside of the Russell 2000, the Nasdaq has been consistently the most overheated index. But after its recent slowdown, I feel more confident in the Nasdaq as a SHORT-TERM BUY.

The RSI is king for the Nasdaq . Its RSI is now around 40.

I follow the RSI for the Nasdaq religiously because the index is merely trading in a precise pattern.

In the past few months, when the Nasdaq has exceeded an overbought 70 RSI, it has consistently sold off.

  • December 9- exceeded an RSI of 70 and briefly pulled back.
  • January 4- exceeded a 70 RSI just before the new year and declined 1.47%.
  • January 11- declined by 1.45% after exceeding a 70 RSI.
  • Week of January 25- exceeded an RSI of over 73 before the week and declined 4.13% for the week.

I like that the Nasdaq is almost at its support level of 13000, and especially that it’s below its 50-day moving average now.

I also remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.

Because of the Nasdaq’s precise trading pattern and its recent decline, I am making this a SHORT-TERM BUY. But follow the RSI literally.

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

For more of my thoughts on the market, such as the streaky S&P, inflation, and emerging market opportunities, sign up for my premium analysis today.

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Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


NIO Sellers in Control Ahead of Report

NIO Inc. (NIO) reports Q4 2020 earnings after Monday’s closing bell, with analysts looking for a loss of $0.38 per-share on $6.7 billion in revenue. If met, earnings-per-share (EPS) will mark an 85% loss reduction compared to the same quarter last year, when the Chinese EV manufacturer was trading at just 1/15th of its current price. The stock fell in November after beating Q3 estimates but recovered quickly, posting an all-time high at 66.99 on Jan 11.

NVIDIA Partnership

NVIDIA Inc. (NVDA) and NIO just announced a partnership to develop a new generation of self-driving vehicles, using NVDA’s DRIVE Orin system-on-a-chip to power E7 sedan technology. The first production vehicle is expected to roll off the assembly line in 2022. The stock topped out right after the news in reaction to the fourth debt offering since 2019, reminding shareholders the company still hasn’t posted a profitable quarter.

Still, NIO continues to grow at a phenomenal rate, with January deliveries increasing by 352.1% year-over-year to a record 7,225 vehicles. Breaking it down, the company noted “deliveries consisted of 1,660 ES8s, the Company’s 6-seater and 7-seater flagship premium smart electric SUV, 2,720 ES6s, the Company’s 5-seater high-performance premium smart electric SUV, and 2,845 EC6s, the Company’s 5-seater premium electric coupe SUV. As of January 31, 2021, cumulative deliveries of the ES8, ES6 and EC6 reached 82,866 vehicles”.

Wall Street and Technical Outlook

Wall Street consensus has grown more cautious after strong 2020 returns, with a ‘Moderate Buy’ rating based upon 7 ‘Buy’ and 4 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $54 to a Street-high $80 while the stock is now trading nearly $6 below the low target. The worldwide chip shortage is impacting this poor placement, which has also weighed on Tesla Inc. (TSLA).

The stock topped out at 13.80 just two days after coming public in the United States at 6.00 in September 2018. It mounted that resistance level in July 2020, entering a momentum-fueled advance that lost steam after stretching above 50 in November. A January breakout above that barrier failed about two weeks ago, dropping NIO into an intermediate correction that’s held, so far at least, above December range support at 38.43.

For a look at all of this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Nio Posts More Than Double Revenue in Q2 Despite COVID-19 Crisis; Target Price $17

Nio Inc, a pioneer in China’s premium electric vehicle market, said its revenue more than doubled in the second quarter as vehicle deliveries surge despite the disruption caused by COVID-19 pandemic, sending its shares up about 10% in pre-market trading on Tuesday.

China’s electric vehicle maker said its quarterly revenue increased to at 3.72 billion yuan in the second quarter, representing an increase of 146.5% from the second quarter of 2019 and an increase of 171.1% from the first quarter of 2020. Excluding items, Nio reported a loss of 1.08 yuan per American depository share, experts had forecast a loss of 1.84 yuan per ADS.

Auto industry in the world’s second-largest economy recovered from the COVID-19 outbreak as demand picked after lockdown restrictions were eased after the country reported fewer coronavirus cases. China was also the world’s first country to register economic growth.

Nio said it delivered 10,331 in the second quarter of 2020, including 8,068 ES6s and 2,263 ES8s, compared with 3,553 vehicles delivered in the second quarter of 2019 and 3,838 vehicles delivered in the first quarter of 2020.

China’s electric vehicle maker expects total revenues to be between 4,047.5 million yuan and 4,212.3 million yuan, representing an increase of approximately 120.4% to 129.3% from the same quarter of 2019, and an increase of approximately 8.8% to 13.3% from the second quarter of 2020.

U.S.-listed shares of the company shares gained about 10% to $15.58 in pre-market trading on Tuesday. The stock surged over 250% so far this year.

Executive comment

“The current constraints on the productions will be lifted in the near future and we are confident that our production capacity can meet the accelerated demand of our models,” Chief Executive Officer William Bin Li said in a press release.

“We achieved a record-high quarterly delivery of 10,331 ES8 and ES6 vehicles in total in the second quarter of 2020 and expect to deliver 11,000 to 11,500 vehicles in the third quarter as the momentum continues.”

Nio stock forecast

Six analysts forecast the average price in 12 months at $7.26 with a high forecast of $13.50 and a low forecast of $2.50. The average price target represents a -48.91% decrease from the last price of $14.21. From those six, two analysts rated ‘Buy’, two analysts rated ‘Hold’ and two rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $12 with a high of $17 under a bull scenario and $7 under the worst-case scenario. On June 24, Goldman Sachs cuts to neutral from buy, raising the target price to $7 from $6.4.

However, we think it is good to buy at the current level and target $17 as 100-day Moving Average and 100-200-day MACD Oscillator signal a strong buying opportunity.

Analyst comment

“We believe the recent rally reflects the smooth funding process from Hefei investors. Tesla‘s success in China has also attracted fund flows for EV makers, that we think has helped to drive NIO stock performance rally,” said Tim Hsiao, equity analyst at Morgan Stanley.

“We remain EW given the long-term uncertainties around scalability. Our price target hike reflects a more meaningful sales volume upgrade in the forecast period. We lower our WACC assumption to 12% from 14% (vs. 10.9% for major OEMs), given lower equity and debt costs due to rate cuts and NIO’s proven operation,” the analyst added.

Upside and Downside Risks

1) Progress in planned A-share listing. 2) Stronger-than-expected sales volume. 3) Better-than-expected improvements in operating efficiency, Morgan Stanley highlighted as major upside risks to Nio.

1) Weaker-than-expected sales volume. 2) Lack of signs of efficiency improvement, were the major two downside risks.

NIO Drives Higher On Upbeat June Sales

NIO Inc. (NIO) shares charged 22.71% higher Monday after the Chinese electric vehicle maker reported June sales jumped 179% from a year earlier despite challenges from the pandemic. The better-than-expected figure comes on the back of U.S. rival Tesla, Inc. (TSLA) smashing Wall Street quarterly delivery projections.

NIO delivered 3,740 vehicles last month, taking its second-quarter tally to 10,331 vehicles. It marks the first times the Shanghai-based carmaker has exceeded 10,000 quarterly shipments – an impressive feat amid slipping global auto sales.

As well as topping its delivery expectations, the company’s chief operating officer Steven Feng remains confident of meeting operational efficiency targets. ‘We are pleased to deliver solid results driven by our competitive products, superior services, and expanding sales network. Our deliveries in the second quarter of 2020 exceeded the high end of our earlier projection, and we are confident that our goals on gross margin and operational efficiency will be achieved.’ Feng said, per CleanTechnica.

Investors may have already factored in most of the upside, given the company’s American Depositary Receipt (ADR) listed on the New York Stock Exchange has risen a staggering 366% over the past three months as of July 7.

Wall Street View

Goldman Sachs analyst Fei Fang upgraded the stock from ‘Neutral’ to ‘Buy’ in early June but revised his rating back to ‘Neutral’ by the end of the month and slashed his 12-month price target from $7 to $6.4.

Although the analyst still likes the company’s underlying fundamentals, he has grown more concerned about its lofty valuation. Since Fang’s initial upgrade on June 3, NIO shares trade over 100% higher, despite the firm posting an unaudited first-quarter net loss of $243.3 million.

Most other analysts have also taken the ‘wait and see’ approach, with the stock receiving 9 ‘Hold’ ratings. Currently, the consensus price target among analysts sits at $39.01, according to Yahoo! Finance – amazingly representing another 239% upside from Monday’s $11.51 close.

Technical Outlook

Since bottoming out just above $2 in mid-March, Nio shares have trended steadily higher with price accelerating on heavy volume in the past two trading sessions. Investors should be mindful of chasing recent gains as the relative strength index sits deep in overbought territory, increasing the probability of a retracement. Instead, those who wish to buy should look for an entry point near $5, where the stock finds a confluence of support from a horizontal trendline and the 50-day simple moving average.

NIO Chart