Thanks to better-than-expected delivery totals, shares of Nio Limited (NIO) have begun to drive upward, rising 23% just over the past week. But there’s still a lot of catching up to do. The stock is still down 63% year to date, including 35% 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 third quarter fiscal 2022 earnings before the opening bell Thursday. The Chinese electric vehicle maker recently reported its October delivery numbers that revealed it had delivered 10,059 vehicles. That total represent more than 174% year-over-year growth. While skeptics will point out that the company benefited from having two more vehicles available for sale this year, Nio has had to consistently overcome production headwinds.
In the most recent quarter, the growth story was impacted by “supply chain volatilities due to the COVID-19 situations in certain regions in China,” per the company statement. Nevertheless, October deliveries had a strong mix of premium models, which consisted of 5,979 premium smart electric SUVs and 4,080 premium smart electric sedans. On a year-to-date basis, the company has now delivered 92,493 vehicles, marking a 32% year-over-year increase. Cumulative deliveries reached 259,563 as of October 31, 2022.
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. With the stock down some 70% year to date, the company on Thursday 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 September, Wall Street expects Nio to report a per-share loss of 16 cents on revenue of $1.8 billion. This compares to the year-ago quarter when it reported a per-share loss of 28 cents on revenue of $1.47 billion. For the full year, ending in December, the loss is expected to narrow from $1.00 per share a year ago to 60 cents, while full-year revenue of $7.94 billion would rise 47.2% 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. For that reason, over the past three months, the projected full-year revenue growth has been revised lower from 66% year over year to the current 47% year over year. The company will need to ramp up its delivery capacity to get the market re-energized about the stock.
While reporting its Q2 numbers, the company did say that production should "accelerate," starting in the third quarter of 2022. In the second quarter, the company missed on the bottom lines. While revenue did beat Street estimates, coming in at $1.48 billion (up 22%), above consensus by $62 million, the company suffered more production setbacks which impacted earnings resulting in widening losses which came to $411.7 million.
The second quarter losses are due to heavy investments the company continues to make to ramp up production on new vehicle models that either just came to market. The market is nonetheless concerned about the company’s gross margins, which continues to shrink as a result. On Thursday the stock will move higher if Nio can provide strong delivery guidance for the next quarter and full year, while also overcoming supply chain constraints which has impacted 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.
Read Richard's Bio%20Press%20Releases%20%7C%20Nasdaq&_biz_n=0&rnd=852893&cdn_o=a&_biz_z=1740811329547)
%20Q3%202022%20Earnings%3A%20What%20to%20Expect%20%7C%20Nasdaq&_biz_n=1&rnd=377815&cdn_o=a&_biz_z=1740811329547)
%20Q3%202022%20Earnings%3A%20What%20to%20Expect%20%7C%20Nasdaq&rnd=17157&cdn_o=a&_biz_z=1740811329551)