Chinese electric vehicle maker Nio Inc. — the company likely most known for offering to swap empty batteries for new, fully-charged ones, in no more than three minutes — is gearing up to announce its Q3 2023 earnings on Tuesday.
Analysts estimate a loss of approximately $0.23 per share on quarterly sales of $2.7 billion. Despite a 40% decline in market capitalization over the past year, Deutsche Bank analyst Edison Yu is optimistic, urging investors to buy Nio shares. Yu predicts a 53% increase in Nio stock over the next 12 months, forecasting the shares to potentially reach $11.
In early November, Nio stock rose over 10% on news of substantial workforce cuts, as the company aimed to enhance efficiency and cut costs in response to intensifying competition.
Nio has confirmed meeting the lower end of its Q3 EV delivery guidance, selling 55,432 units. Yu anticipates gross profit margins will improve by 7 to 8 percentage points over Q2 as volumes increase.
However, Yu acknowledges the growth in selling, general, and administrative expenses since Q2, and forecasts a loss of $0.32 per share for the quarter — worse than the consensus forecast.
This isn’t the only bad news in Yu’s recommendation to buy Nio stock. “Competition is only getting fiercer” in the Chinese EV market, warns the analyst, and “sentiment is very negative.” He suggests that Nio, often called one of China’s Tesla competitors, may struggle to achieve sales growth at the desired pace, with Q4 delivery volumes potentially falling by 11% to 18%. Yu has concerns that falling short of delivery targets could impact both gross and profit margins.
Yu has also scaled back his Nio delivery forecasts, projecting 157,000 units in 2023 and 200,000 units in 2024 — cuts of 10% and 26%, respectively. The analyst summed up:
“Encouragingly, the company appears to be making big changes especially to sales structure and expense management/ROI. This should bear fruit in the coming quarters while material improvement in volume trajectory may take more time.”
According to 5 analysts covering Nio stock surveyed by TipRanks, 4 Buys and 1 Hold have been issued for the shares in the past three months. According to the consensus 12-month Nio stock forecast, the company’s shares are a Strong Buy. Given the $14.38 average price target, shares could surge close to 101% in the next year.
At the time of writing on Monday, Nio American Depositary Receipts (ADR) were at around $7.17 in after-hours trading. The Nio stock price remains 26.67% down year-to-date.
Tesla stock closed at $238.83 on Friday, and is currently up by close to 94% year-to-date, as per MarketWatch data.
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