NIO stock price: China’s Tesla challenger slides after missing expected earnings mark

Nio (NIO) stock has been rebounding after a significant drop on Tuesday's opening. Following disappointing second-quarter (Q2) results released early that day, Nio initially plunged to $9.46 but has since recovered to $10.60 trading in premarket on August 30, according to Marketwatch data.

The Chinese electric vehicle (EV) manufacturer, Nio, disclosed Q2 earnings and revenue that fell short of analysts' predictions for the period. Nio’s reported revenue came in at 8.77 billion yuan ($1.21 billion) — missing the 9.25 billion yuan expected by Wall Street. Adjusted loss per share stood at 3.28 yuan (45 cents), compared to the projected 2.45 yuan.

Nio's adjusted figures exclude share-based compensation expenses. Using GAAP accounting, the company reported a net loss of $835.1 million — equivalent to 51 cents per share.

Nio introduced an upgraded version of its main ES6 crossover on the new "NT2.0" platform in May, followed by a station wagon variant of the ET5 sedan in June. This refreshed lineup has already led to improved outcomes, with 20,462 vehicles delivered in July alone.

During Q2, Nio delivered only 23,520 vehicles as it cleared out the last of its previous models with substantial discounts.

In June, Nio bolstered its financial position by securing a $738.5 million equity investment from CYVN Holdings, an Abu Dhabi government-controlled fund, which now controls close to 7% of the company. As of the end of June 2023, the firm had $4.3 billion in cash and equivalents.

For Q3 2023, Nio anticipates the delivery of between 55,000 and 57,000 vehicles — a notable increase from the 31,607 EVs delivered in the same period of 2022. Revenue for this timeframe is projected to range from $2.61 billion to $2.69 billion, compared to $1.83 billion in the same period last year.

Company background: Top Chinese EV maker with UAE backing

NIO Inc., a leading Chinese EV manufacturer headquartered in Shanghai, traces its origins to 2014 when it was founded as NextEV by Lihong Qin and William Li. It rebranded in 2017 as Nio Inc. with an emphasis on revolutionary battery technology. The company was listed on the New York Stock Exchange (NYSE) via American Depositary Receipts (ADRs) in September 2018.

One of China’s top 15 EV manufacturers, NIO is eyeing to chip away at Tesla’s (TSLA) market share globally and join the ranks of more established PRC-based market players like BYD and Geely.

Guided by its philosophy of "Blue Sky Coming," Nio is betting on breakthroughs in EV and battery tech. To address battery cost and charging challenges, Nio designs cars with easily removable batteries and is building a network of battery-swapping stations. This approach not only fosters lasting customer relationships but also facilitates selling cars without batteries, lowering costs.

Battery swapping opens the door not only to long-term customer relationships via battery-swapping plans, otherwise known as BaaS (battery-as-a-service) but also to the ability to sell cars without a battery, which greatly reduces the price point. The company announced the opening of its 1,000th swapping station in China in the summer of 2022, and was on track at the time to begin expanding outside of China. The first location outside of China was opened in Norway.

Nio's core activities are spread across EV design, manufacturing, and sales across China, the US, and Europe. The firm also produces electric motors, battery packs, and components for the wider EV market. In 2022, Nio announced plans to enter the smartphone market and establish a production facility in Shenzhen.

Nio's vehicle lineup revolves around three main platforms: the EP-9 sports car, the SUV/crossover line (EC-6, ES6, ES7, ES8), and the sedan offerings (ET5, ET7). Upcoming models include the ES3 SUV crossover and the EF9 minivan. Under development are the ET full-size sedan and the Eve station wagon—an autonomous compact vehicle.

NIO stock price forecast: Analysts mostly optimistic on EV maker’s future

Despite the forecasted recovery in vehicle margins, Morningstar downgraded its fair value estimate of NIO stock to $13.30 per ADS from $14.00, but maintained its “positive view” on the firm:

“Despite the near-term margin pressure, we expect vehicle margin to record sequential recovery in the second half as economies of scale kick in and with the decline in battery cost. Management indicated that vehicle margin will improve to double digits in the third quarter and to around 15% in the fourth quarter. We maintain our positive view as Nio enters a strong model cycle with improving sales momentum driven by new models.”

12 Wall Street analysts surveyed by TipRanks offered a consensus average price target of $13.27 with a high NIO stock forecast of $19.20 and a low forecast of $7.50. The average price target indicated a potential 21.85% upside from the closing price of $10.89 on August 29. The analysts’ consensus recommendation was “Moderate Buy”.

In a technical analysis, FXStreet’s Clay Webster wrote:

“NIO stock has descended back from its early August high just above $16 per share to a former supply/resistance zone ranging from $10.15 to $11.30. This would be a good spot to enter since the projected healthy delivery report for August should see NIO burst up to the $13 to $14 resistance range in short order. A break of $10.15, however, will produce more selling that sends the Nio stock price down to earlier resistance-turned-support at $9.50.”

When considering NIO stock price forecasts, remember that trading involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and and should not be construed to be investment advice.