After sending shares swinging both ways initially, Nio’s (NIO) Q2 results failed to impact the stock’s performance meaningfully in the subsequent session. The company delivered a mixed report, with a disappointing near-term outlook, although the prospect of hitting targets later in the year might have assuaged investors’ worst fears.
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The Chinese EV maker managed a beat on the top-line with revenue climbing 22% year-over-year to $1.54 billion – $120 million ahead of the Street’s forecast. However, with a net loss over $400 million, the figure was more than 50% above the prior quarter’s loss. Additionally, due to the ongoing investments in power and the service network, gross margins contracted from 18.6 to 13%.
As such, the company’s adj. GAAP EPADS of -$0.20 came in worse off than the -$0.18 expected on Wall Street.
For Q3, total revenues are expected in the range between $1.918 billion and $2.03 billion. Consensus was looking for $2.38 billion.
The combined effect of widening losses and a disappointing outlook are a perfect recipe to send shares down. However, while that was the initial reaction, the stock recovered the losses later on and Morgan Stanley’s Tim Hsiao explains that this is down to the “upbeat tone” on the Q4 sales outlook. ”The company is confident of achieving its full-year target of 150k units this year, implying 66- 68k units of vehicle sales in 4Q, doubling QoQ,” the analyst explained.
Is that target feasible? Well, Nio anticipates monthly deliveries of roughly 20,000 in October and to “hit record level” throughout the whole of Q4 on the back of “improving component supply and progressive output ramp of factory 2(F2).” In December, monthly capacity of ET5 production at this facility is expected to exceed 10,000 units.
Ultimately, it all depends on whether Nio will be up to the task. “With demand robust but supply still tough, NIO’s execution will determine if it can end 2022 with a whimper or a bang,” Hsiao summed up.
Hsiao evidently thinks Nio has what it takes to deliver. The analyst sticks with an Overweight (i.e., Buy) rating along with a $31 price target, suggesting shares will gain 77% over the coming months. (To watch Hsiao’s track record, click here)
Hsiao is certainly not alone in his assessment. All 11 other recent analyst reviews are positive, bestowing upon this stock a Strong Buy consensus rating. The analysts see the shares yielding returns of 75% in the year ahead, given the average price target comes in at $30.97. (See Nio stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
