Nio (NYSE: NIO) unveiled its first-quarter earnings report on June 6. The Chinese electric vehicle (EV) manufacturer reported a 7% year-over-year revenue decline to 9.91 billion yuan ($1.37 billion), missing analyst estimates by 520 million yuan. Its adjusted net loss widened from 4.15 billion yuan to 4.9 billion yuan ($679 million) — or 2.39 yuan ($0.33) per American depositary receipt (ADR) — falling short of the consensus forecast by 0.19 yuan.
Nio’s stock plunged almost 7% following the disappointing report, now hovering more than 20% below its initial public offering (IPO) price. But, amidst this bearish sentiment, does this unloved EV stock still hold allure for contrarian investors?
Image source: Nio.
The Rise and Fall of Nio
Nio emerged as a red-hot player in the EV sector upon its September 2018 IPO. Known for its array of electric sedans and SUVs, Nio set itself apart with its innovative removable batteries, enabling quick swaps at dedicated stations to tackle the arduous charging times associated with traditional EVs.
The company witnessed a meteoric rise in deliveries, skyrocketing by 81% in 2019, 113% in 2020, and 109% in 2021. This performance dazzled investors, propelling its stock over 10 times from its IPO price of $6.26 per ADR to a record high of $62.84 in February 2021.
However, Nio’s growth trajectory hit a snag in the subsequent years due to supply chain hiccups, weather disturbances, economic headwinds in China, and intense pricing competitions in the EV landscape. As a result, its delivery growth slowed to 34% in 2022 and 31% in 2023. The company’s vehicle margin also dwindled from 20.2% in 2021 to 9.5% in 2023.
Entering a Cyclical Slump
In the first quarter, Nio witnessed a significant 40% drop in deliveries sequentially and a 3% year-over-year decline. This marked a stark deceleration from its previous delivery growth rates in the latter half of 2023, accompanied by a sequential shrinkage in vehicle margin.
Period | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 |
|---|---|---|---|---|---|
Deliveries | 31,041 | 23,520 | 55,432 | 50,045 | 30,053 |
Growth (YOY) | 20% | (6%) | 75% | 25% | (3%) |
Vehicle margin | 5.1% | 6.2% | 11% | 11.9% | 9.2% |
Data source: Nio. YOY = year over year.
In the second quarter, Nio anticipates a delivery growth rebound, forecasting a 130% to 138% year-over-year surge to 54,000 to 56,000 vehicles. Revenue is expected to climb 89% to 95% year over year, underpinned by strategic initiatives such as the launch of the new ET7 Executive Edition sedan, expansion of its battery swapping ecosystem, and the introduction of the Onvo smart vehicle brand.
Despite this upbeat outlook, Nio’s margins remain precarious, with intensified competition from industry stalwarts like Tesla pressuring its pricing dynamics. Rising operating expenses from R&D, network expansion, and other investments further strain its financial health, showcased by a widening net loss on a GAAP basis.
The Road Ahead for Investors
With an enterprise value of 70.4 billion yuan ($9.7 billion) and a price-to-sales ratio of 1, Nio’s stock may appear attractively priced; however, sustained delivery stabilization and margin improvement are essential for sustained upside potential. Additionally, macroeconomic factors, including U.S.-China relations, form additional hurdles for the stock’s recovery.
Investors eyeing Nio must weigh these factors carefully before diving in. While the future holds promise for Nio, the journey ahead may involve navigating choppy waters before reaching clearer horizons.
Considering an Investment in Nio
When contemplating a stake in Nio, it’s prudent to estimate whether:
The Motley Fool Stock Advisor analyst team recently pinpointed what they consider the
Exploring Investment Opportunities Beyond Nio
Historical Success Stories
Imagine a time when Nvidia, the tech powerhouse, graced the prestigious list of top stocks back on April 15, 2005. Had you seized the moment and invested $1,000 following that advice, your account would now boast a staggering $740,688. A testament to the uncanny potential concealed within the market’s labyrinth.
The Stock Advisor Blueprint
For ambitious investors seeking guidance and the promise of prosperous returns, Stock Advisor stands as an illuminating beacon. Providing a straightforward roadmap to success, this service not only aids in portfolio construction but also offers timely insights from seasoned analysts. With Stock Advisor in your corner, you receive two freshly minted stock recommendations every month – ensuring you stay ahead in the ever-evolving market landscape.
Since its inception in 2002, Stock Advisor has outshined the S&P 500’s performance by more than fourfold. A testament to the astuteness and foresight embedded within this remarkable service.
Embracing New Investment Horizons
Don’t confine your aspirations to the confines of Nio, venture beyond and unlock a world brimming with possibilities. Explore the curated list of the 10 best stocks, carefully selected to steer investors towards prosperity and growth. The stars of tomorrow might be lurking in the shadows, waiting to be unearthed.
Step into the realm of Stock Advisor and witness firsthand the transformative power it holds. The opportunity to rewrite your financial narrative beckons, and it all begins with a single choice – a choice backed by expertise, diligence, and a dash of fortune.
In Conclusion
As the financial markets continue their eternal dance, it’s imperative to heed the call of opportunity wherever it may arise. Nio, a familiar titan in the investment landscape, stands tall, but the allure of exploration and discovery lies beyond its domain. Stock Advisor provides a gateway to uncharted territories, where the promise of growth and prosperity awaits those audacious enough to seize it. The time to expand your horizons is now – will you rise to the occasion?
Legal Obligations
For the discerning investor cognizant of transparency and diligence, it’s prudent to note that Leo Sun holds no stake in the stocks discussed. The Motley Fool, a paragon of integrity, proudly discloses its positions in and recommendations for Nio and Tesla – underscoring its commitment to ethical investing practices.