Nio Limited (NIO) Q3 Earnings: What to Expect

NIO's electric vehicle ET7
Credit: Aly Song - Reuters / stock.adobe.com

Can Nio Limited (NIO) finally catch up to its peers after recent underperformance? Over the past three months and nine months, NIO stock is down 4% and 25%, respectively. By contrast, Tesla (TSLA) has soared 73% and 45%, respectively, during that same span. But now might be a good time to hop on for a ride.

That is one of many questions investors will want answered when Nio reports its third quarter fiscal 2021 earnings result after the closing bell Tuesday. Nio shares have fallen even though the Chinese electric vehicle maker has posted consistently strong returns over the past year. Meanwhile, China’s increased regulatory environment has presented a risk to Nio’s massive growth rate. This gas caused analysts to be more cautious about the overall valuation of the company, which could suffer if its outlook worsens.

That’s about to change, Deutsche Bank analyst Edison Yu believes. He has a Buy rating on the stock with a $70 price target, implying 66% upside from current levels. Catalysts for NIO stock include November monthly deliveries as well as new products/tech unveiled at NIO day in December. The company guided for Q3 deliveries to reach a range of 22,500 to 23,500 vehicles. This compares to deliveries of only 10,628 vehicles globally in September 2021 and 24,439 vehicles in the second quarter.

These deliveries show growth rates of 125.7% and 100.2% year over year. That growth rate is significant given NIO’s unique position as a high-growth electric vehicle manufacture operating in the high-priced/premium segment. In other words, the company’s vehicles command premium prices compared to competitors that produces mass-market vehicles. And thanks to consecutive quarters of record deliveries, the company is no longer cash-strapped. But NIO must quell concerns about persistent supply chain problems and issue solid guidance for the stock to rebound.

For the three months that ended September, Wall Street expects Nio to report a loss of 9 cents per share on revenue of $1.46 billion. This compares to the year-ago quarter when the loss came to15 cents per share on revenue of $696.03 million. For the full year, ending December, the loss is expected to narrow from $1.64 per share a year ago to 64 cents per share, up from -73 cents a year ago, while full-year revenue of $5.65 billion would rise 121.2% year over year.

NIO is seemingly operating with tons of advantages. The vehicles it has sold on a year-to-date basis, despite the impressive triple-digit growth, still represent a small fraction of the 1.3 million electric vehicles sold in China in 2020. This means there is still market share to be had in China where EV sales continue to rise, particularly as the Chinese government has embraced policies aimed to increase the adoption of EVs among its consumers.

In the second quarter, the company beat on both the top and bottom lines, reporting adjusted loss of 3 cents per share which beat estimates by 8 cents, while revenue surged 127% to $1.31 billion, which was $20 million above analyst estimates. However, despite the strong numbers, the company cited the ongoing chip shortages and noted persistent supply chain constraints, despite a healthy order inflow. In addition to announcing a ramp up in product introductions, NIO plans to launch two more vehicles in 2022.

On Tuesday if Nio can deliver a top and bottom line beat, while maintaining strong gross margins, along the stock will move higher. The company can also lower concerns about regulatory risk by providing strong delivery guidance for the next quarter and full year.

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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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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