Buy NIO Stock Ahead of Earnings, Says Analyst

EV giant Nio (NIO) will be in the spotlight when it reports second-quarter results after market close today. As the countdown to NIO earnings starts, Wall Street’s confidence backing the stock is strong. Based on Buys only – 6, in total – the stock has a Strong Buy consensus rating. The average price of $64.50 suggests one-year gains of ~47%. (See Nio stock analysis on TipRanks)

The company already reported delivery figures for the quarter in early July. The EV maker recorded 21,896 deliveries in Q2, amounting to a 112% uptick from the same period last year and coming in right at the high end of its guidance. June was particularly strong, as for the first time, Nio delivered over 8,000 vehicles in a month.

The quarter’s deliveries were basically in-line with Deutsche Bank analyst Edison Yu’s forecast, although Yu believes that at 8.57 billion RMB, sales in the quarter will slightly exceed the BBG consensus estimate of 8.30 billion RMB. The analyst has EPS at (0.44) RMB vs. The Street’s call for (0.50) RMB.

Yu thinks the continuing global supply chain issues will play a part in the 3Q outlook, noting the flooding in Germany has impacted the delivery of air suspension shock absorbers. The analyst anticipates management to forecast around 25,000 deliveries and revenue in the 9.0-9.5 billion RMB range.

Other areas of interest to look out for in the earnings call will be additional details regarding NIO’s “mass market brand.”

“This new brand would target the 150-250k RMB price range but could potentially have models at even lower price points,” Yu said. Going by reports in the Chinese media, NIO has tapped Tiecheng Ai, a former VP of Strategic New Businesses at WeWork China, and a close friend of NIO’s President Lihong Qin, to lead development of NIO’s lower-cost model.

Nio is also expanding its footprint in Europe, and after entering Norway and Germany, the Netherlands will be the next port of call with Amsterdam set to be the location of the company’s European HQ. Several job listings were recently posted on LinkedIn, amongst them for CEO of Battery Asset Company, Head of EU Marketing & User Development, and EU Fleet Sales Manager.

“This suggests to us that NIO intends to roll-out the BaaS option in Europe which would materially lower the upfront cost of a vehicle,” Yu noted. The analyst believes the first batch of deliveries will hit the continent in September, starting with roughly a few hundred in Norway.

So, what does it all mean for investors? Ahead of the print, Yu reiterated a Buy rating on NIO shares, along with a $60 price target. If correct, the analyst’s objective could deliver one-year returns of ~38%. (To watch Yu’s track record, click here)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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