Can Nio Limited (NIO) finally catch up to its competitors? After scaling up its electric-vehicle production and achieved delivery growth, Nio enjoyed massive stock price increases over the past two years. But amid geopolitical tensions, its stock is getting hammered.
Aside from the significant rotation out of high-multiple growth stocks, the Chinese electric vehicle maker is also dealing with its own headwinds in terms of slowing growth. Nio stock has gone in reverse over the past year, losing some 60% of its value. With the stock now down 40% year to date, including a 24% plunge over the past thirty days, analysts are coming to the company’s defense. But is now a good time to hop on for a ride? That is one of many questions investors will want answered when the company reports its fourth quarter fiscal 2021 earnings result after the closing bell Thursday.
China’s increased regulatory environment has also presented a risk to Nio’s operation, causing some analysts to be more cautious about the overall valuation of the company. However, Barclays analyst Jiong Shao recently assigned Nio with an Overweight rating and price target of $34, reflecting 61% upside from current levels. "We believe that the rapid adoption of EVs around the world and booming EV sales have presented China’s EV makers a rare opportunity to not only take a sizable market share of the domestic auto market – the largest in the world with about 25-30% global share by units sold per annum – but also build a dominant position on the world stage," noted Shao.
While these electric-vehicle industry trends are poised to benefit Nio in 2022, they will likely also benefit the company’s main competitors. Over the past year, Nio has lost some ground to, among others, Li Auto (LI), Leapmotor, and Xpeng (XPEV). New entrant Hozon Auto, which sells compact crossovers under the Neta brand, has also gained some ground. On Thursday the company can make a strong case for itself and the stock by delivering a top- and bottom line beat, along with strong delivery guidance for the next quarter and full year.
For the three months that ended January, Wall Street expects Nio to report a per-share loss of 12 cents on revenue of $1.54 billion. This compares to the year-ago quarter when it reported a per-share loss of 16 cents on revenue of $1.03 billion. For the full year, the loss is expected to widen from 73 cents per share a year ago to 76 cents, while full-year revenue of $5.66 billion would rise 121.6% year over year.
The main driver of Nio’s stock in recent quarters have been the company’s delivery growth. The metric is significant not only because of the company’s position as a high-growth electric vehicle manufacture, but also for its status as 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. In that vein, Nio’s recent deliveries have disappointed investors, though persistent supply chain issues hasn’t helped.
The company’s January deliveries once again fell below 10,000 vehicles. NIO delivered 9,652 vehicles in January, marking a 33.6% increase year-over-year. By contrast, Xpeng’s deliveries increased 115% year-over-year. Nio is now in fifth place in terms of delivery growth. Despite a healthy order inflow, the ongoing chip shortage issue remains a persistent headwind. On Thursday the stock will move higher if Nio can provide strong delivery guidance for the next quarter and full year, while also quelling supply chain constraints which has impact its operations.
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