NIO - Not too optimistic on this one!
-NIO declined for a few valid reasons. Namely, the fundamentals behind the stock aren’t as pretty as you might think and its valuation is too extreme.
-Now the logical question to ask is whether its current, lower price makes NIO stock a buy.
-Technical analysis may show that the stock is now oversold. This does not mean that in mid
20S the stock is a bargain. Do not confuse value with price.
-In the third quarter of 2021, NIO reported an increase in vehicle sales of 102.4% from Q3 2020 and 9.2% from Q2 2021. Total revenues of $1.52 billion showed an increase of 116.6% from the third quarter of 2020 and an increase of 16.1% from the second quarter of 2021. The gross margin was 20.3%, compared with 12.9% in Q3 2020 and 18.6% in Q2 2021. All of this is positive news.
-So what are the red flags from the Q3 2021 earnings report that most investors are overlooking?
First, the vehicle margin was 18%. In Q3 2020 it was 14.5% and in Q2 2021 this figure was 20.3%. According to NIO, “[v]ehicle margin is the margin of new vehicle sales, which is calculated based on revenues and cost of sales derived from new vehicle sales only.”
-Margin declined on a quarterly basis and should be monitored closely over the next quarters as NIO has plans to increase its manufacturing capacity, start delivering the luxury ET7 model next month and its midsize ET5 sedan in September.
-Profitability continues to be a riddle hard to solve for NIO. In fact, the firm reported a net loss of $443.7 million in Q3 2021. That’s a 140.7% jump from Q3 2020 and a 333.6% leap from the results reported in Q2 2021.
-Its operations losses added up to $153.9 million in Q3 2021 — a 4.9% increase from Q3 2020 and 29.9% increase from Q2 2021.
-Meanwhile, the cost of sales in the third quarter of 2021 increased 98.3% from Q3 2020 and 13.6% from Q2 2021. These details gain further meaning if you consider this comment by NIO itself: “The increase in cost of sales over the third quarter of 2020 and the second quarter of 2021 was in line with revenue growth, which was mainly driven by the increase of vehicle delivery volume in the third quarter of 2021.”
OUR TARGET PRICE:
$19-$20
-Now the logical question to ask is whether its current, lower price makes NIO stock a buy.
-Technical analysis may show that the stock is now oversold. This does not mean that in mid
20S the stock is a bargain. Do not confuse value with price. -In the third quarter of 2021, NIO reported an increase in vehicle sales of 102.4% from Q3 2020 and 9.2% from Q2 2021. Total revenues of $1.52 billion showed an increase of 116.6% from the third quarter of 2020 and an increase of 16.1% from the second quarter of 2021. The gross margin was 20.3%, compared with 12.9% in Q3 2020 and 18.6% in Q2 2021. All of this is positive news.
-So what are the red flags from the Q3 2021 earnings report that most investors are overlooking?
First, the vehicle margin was 18%. In Q3 2020 it was 14.5% and in Q2 2021 this figure was 20.3%. According to NIO, “[v]ehicle margin is the margin of new vehicle sales, which is calculated based on revenues and cost of sales derived from new vehicle sales only.”
-Margin declined on a quarterly basis and should be monitored closely over the next quarters as NIO has plans to increase its manufacturing capacity, start delivering the luxury ET7 model next month and its midsize ET5 sedan in September.
-Profitability continues to be a riddle hard to solve for NIO. In fact, the firm reported a net loss of $443.7 million in Q3 2021. That’s a 140.7% jump from Q3 2020 and a 333.6% leap from the results reported in Q2 2021.
-Its operations losses added up to $153.9 million in Q3 2021 — a 4.9% increase from Q3 2020 and 29.9% increase from Q2 2021.
-Meanwhile, the cost of sales in the third quarter of 2021 increased 98.3% from Q3 2020 and 13.6% from Q2 2021. These details gain further meaning if you consider this comment by NIO itself: “The increase in cost of sales over the third quarter of 2020 and the second quarter of 2021 was in line with revenue growth, which was mainly driven by the increase of vehicle delivery volume in the third quarter of 2021.”
OUR TARGET PRICE:
$19-$20
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