NIO’s (Ticker: NIO) Q4 earnings were disappointing — and (most) investors were disappointed.
The Chinese electric-vehicle maker’s stock sold off by 13% Tuesday, one day after NIO delivered a tiny sales “beat” — but lost twice as much money as analysts had bargained for.
How bad was the news, exactly? In Q4, NIO reported $1.02 billion in quarterly sales, inching past analysts’ predicted $1.01 billion. On the bottom line, however, the 17,353 EVs NIO delivered in the fourth quarter of 2020 cost the company a GAAP net loss of $0.16 per share, and an “adjusted” loss of $0.14 per share — twice the $0.07 pro forma loss Wall Street had predicted.
Not all of NIO’s news was bad. NIO grew its sales 133% year over year in Q4, and turned last year’s Q4 gross profit loss into a positive gross margin in Q4 2020 — 17.2% for the quarter. Operating losses declined by 67%, net losses by 52%, and “adjusted” net losses by 53%. And viewed in that context, the quarter was good enough to get a pass from investment bank JPMorgan despite the big net loss.
More than just a pass, actually. According to JPMorgan analyst Nick Lai, NIO’s Q4 was “solid,” and even a “meaningful beat” if you back out the “unrealized foreign exchange losses” that were the primary reason NIO lost twice as much money as analysts had anticipated. And the losses aside, the fact that NIO guided to better than 20,000 vehicle deliveries in Q1 2021 (at least 3% more than Lai had been banking on) has the analyst feeling “optimistic” about NIO’s “long-term prospects and distinctive business model with [autonomous driving] as a service.”
As Lai pointed out, NIO’s partner JAC Motors is expanding production capacity to facilitate NIO’s growing sales, aiming to be able to produce 150,000 units annually one a single-shift production model — or twice that with two shifts per day working on churning out NIO ES6, ES8, and EC6 automobiles — and the new ET7 electric sedan as well. After seeing how fast production ramped in Q4, and NIO’s projections for Q1, the analyst feels confident in predicting that deliveries will more than double this year, to 90,500 units or better.
Lai noted that one bottleneck that might prevent NIO from hitting this goal is the well-publicized deficit in automotive semiconductor chip supplies (and another, constrained supplies of electric batteries). The analyst sees these reducing production rates to perhaps 7,500 units per month in Q2, but easing up thereafter.
What kinds of production rates should investors be looking for, then? Assume 20,000 units produced in Q1, and 22,500 in Q2 — that leaves 48,000 cars that NIO will need to build and ship in the second half of the year in order to hit its year-long production goal. That works out to 8,000 cars per month in Qs 3 and 4, and if NIO can do 7,500 cars a month with supply chain problems, it seems reasonable to assume it can do 8,000 a month without them.
In any case, Lai doesn’t seem to worried about the potential for a sales miss. In lowering his price target on the stock from $75 to $70 (but keeping his Outperform rating on the stock), Lai explains that his only real concern is that stock dilution has cut the value of NIO shares slightly. Earnings losses and production risks seem to bother him not at all.
Other analysts share a similar opinion when it comes to NIO. Data shows out of 10 analysts, 7 are bullish and 3 are sidelined. With a consensus price target of $68.33, the potential upside is about 54%.
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