NIO Introduces a New Smartphone Despite its ADR Crisis

NIO Inc. NIO has become the first EV maker to launch a smartphone today, Sep 21. The mobile phone, which uses Android as its operating system, is priced between $900-$1000, and is targeting electric vehicle (EV) owners who see in-car entertainment and mobile phone connectivity as essential features in buying their car.

CEO William Li expects at least half of his existing customers to opt for this phone. While unveiling the phone is Shanghai, he highlighted its features like the ability to control multiple cars with one device, or to unlock a car even when switched off. The phone can also be used as a regular smartphone, and will be available for customers other than EV owners.

NIO has been having a topsy turvy year, with its stock price falling 9.5% year to date, as of Sep 20, 2023. The China-based EV maker has been struggling to boost its revenues and incurred a second-quarter 2023 net loss of $835 million, 113% wider year over year. This was the third consecutive quarter that its losses doubled.

On Sep 19, NIO announced that it would be selling $1 billion of its value in convertible bonds, with the first half due in 2029 and the other half in 2020. Promptly, American Depositary Receipts (ADRs) of the company plunged. This is because selling of convertible bond entails the possibility of conversion into shares, which would then dilute the ownership interests of existing shareholders. Nio ADRs had peaked in February 2021, but have lost about 85% of their value since. Tuesday's fall have sent them into negative territory for 2023.

NIO’s expected earnings growth rate for the current year is -37.2%. The Zacks Consensus Estimate for its current-year earnings has deteriorated -23.8% over the past 60 days. The company currently carries a Zacks Rank #4 (Sell).

Two of its competitors from the EV segment, Nikola Corporation NKLA and Fisker Inc. FSR, have also made convertible bond offerings this year and reported losses in the second quarter. But both Nikola and Fisker are better placed, currently carrying a Zacks Rank #2 (Buy) and #3 (Hold), respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, NIO is showing signs of recovery from its revenue woes in the first half of the year, as August deliveries have gone up 81%, thanks to the market popularity of its newly revamped ES6 SUV. While it has been freshly hit by the announcement of the convertible bonds, the launch of this smartphone might aid that recovery whilst opening up a new product vertical.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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