Nio Limited (NIO) 4th Quarter Earnings: What to Expect

Chinese electric carmaker Nio Limited (NIO) will release its fourth quarter earnings result before the opening bell Tuesday. Vying to become the next Tesla (TSLA), the young startup has created tons of buzz about the domestic Chinese EV industry.

Founded in China in 2014, Nio sells its vehicles exclusively in China. And this makes it tough for investors to reconcile putting money to work on Nio stock amid global nervousness over the potential economic effects of the coronavirus outbreak in China. The Tencent (TCEHY)-backed automaker in December not only announced its third production vehicle (an all-electric SUV called the EC6), Nio also unveiled a new battery pack that can power all three of its models to travel well over 300 miles on a full charge.

However, as the company’s cash burn rises, questions about the company’s viability has increased. The company ended the third quarter of 2019 with just $274 million in cash, and also told its shareholders the company will only survive if it rapidly raises new funding. It has done just that. But will be enough? Nio last week came to terms with Hefei’s city government on a fundraising of more than $1.42 billion, which also included new manufacturing facilities.

The news sent its share price surging 30% last week. But with the company sitting on $1.5 billion of debt and expected to post negative free cash flow of $1.4 billion for 2019, on Tuesday Nio will need to further dispel its funding concerns. And aside from a top- and bottom-line beat, it will need to also provide upbeat delivery guidance and outline ways it will achieve profitability.

For the three months that ended January, Wall Street expects Nio to report a per-share loss of 33 cents on revenue of $405.33 million. This compares to the year-ago quarter when it reported a per-share loss of 50 cents on revenue of $512.21 million. For the full year, the loss is expected to narrow from $70.23 per share a year ago to $9.81 per share, while full-year revenue of $7.95 billion will rise more than 1000% year over year.

Nio in November signed a deal with Mobileye which is owed by Intel (INTC). Nio will manufacture Mobileye’s robotaxis, which Intel views as a necessary precursor to consumer autonomous vehicles which it sees as a strategic growth initiative. In the third quarter it beat on both the top and bottom lines, reporting an adjusted loss per share of -33 cents, which was a penny better than Wall Street’s estimates. Third quarter revenue of $257 million also came well above analysts’ estimates of $230 million.

For some context, adjusted per-share losses was 77% better than the year before, while Q3 revenue was 25% higher. Its losses from operations also improved 14.30% from the year prior. On Tuesday the company will need to show it has the staying power to achieve its lofty ambitions, particularly as the coronavirus affects China. It must also guide in a manner that suggests not only a strong level of confidence it can fulfill its commitment to Mobileye, it must demonstrate it can execute on its long-term strategy.

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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