Shares of Chinese electric vehicle maker Nio (NIO) have been in reverse over the past year, losing some 55% of its value amid the stock market sell-off. Aside from threats of Nio being delisted from the U.S. exchanges, the company has also suffered from COVID-related supply chain issues which have pressured the entire industry.
With the stock now down 44% year to date, including almost 20% decline over the past six months, investors want to know if now’s the right time to take a position. That is one of many questions Nio will have to answer when the company reports its second quarter fiscal 2022 earnings before the opening bell Wednesday. The company reported in July vehicle delivery numbers which, while encouraging, left much to be desired.
The company delivered 10,052 vehicles, which is about 27% higher on a year-over-year basis and marking its third-straight monthly increase. However, when factoring the June deliveries of 12,961 vehicles, it marks a sequential drop of about 22%. The good news is that July deliveries had a strong mix of premium models, where the company the delivered 7,579 vehicles and 2,473 premium smart electric sedans. On a year-to-date basis, Nio has now delivered 60,879 vehicles, marking a 22% rise year over year.
However, entering this year, expectations for vehicle sales and total revenues were much higher, given that the company was ramping up additional production capacity as well as launching of new models. Covid-related supply chain issues have pressured the company’s growth, including suffering an almost 30% drop in April deliveries. The company on Wednesday can make a strong case for its value 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 June, Wall Street expects Nio to report a per-share loss of 17 cents on revenue of $1.42 billion. This compares to the year-ago quarter when it reported a per-share loss of 7 cents on revenue of $1.31 billion. For the full year, ending in December, the loss is expected to narrow from $1.02 per share a year ago to 60 cents, while full-year revenue of $8.95 billion would rise 65.9% year over year.
The main driver of Nio’s stock will continue to be the company’s delivery growth. The metric is significant not only because of Nio's position as a high-growth electric vehicle manufacturer, but also for its status as operating in the high-priced/premium segment. In that regard, the company will need to ramp up its delivery capacity to get the market re-energized about the stock. To be sure, just as the company was boosting production and retrofitting some facilities, the company faced significant shutdown in China due to Covid.
The company says production should accelerate starting in the third quarter of 2022. Assuming that’s the case, NIO stock is poised not only to recover in the second half of the year, the shares may rally well into 2023. In regard, the stock is up about 18% over the past three months, suggesting investors are more optimistic about the future. In the first quarter, the company did beat on both the top and bottom lines, though the results didn’t excite investors.
The market was also concerned about the company’s gross margins which took another step lower, falling to 14.6% down from 19.5% in Q1 of 2021. On Wednesday 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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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