NIO’s (NYSE:NIO) shareholders experienced some pain today, but they shouldn’t give up hope. Despite a rough first quarter, NIO has three more quarters in 2024 to prove its ability to turn around and deliver great results. Consequently, I am bullish on NIO stock and view the share-price dip as a good opportunity.
NIO is a China-based electric vehicle (EV) manufacturer. Due to tariff-related issues, NIO won’t likely sell its EVs in the U.S. anytime soon.
Therefore, investors will want to closely examine whether NIO is growing its vehicle deliveries and revenue from sales in China and elsewhere. The company didn’t start off with great numbers in the first three months of 2024, but there’s still hope that NIO will accelerate and improve in the second, third, and fourth quarters.
NIO Stock Drops, but Don’t Judge Too Quickly
Sometimes, short-term stock traders can be very quick to judge a company’s results. For example, NIO stock fell by 6% today after the company released its first-quarter 2024 operational and financial results. Before you join the sellers, however, I encourage you to get the full story and come to your own conclusion.
It’s true that NIO’s first-quarter vehicle deliveries decreased 3.2% year-over-year to 30,053 units. Perhaps that’s one reason for the share-price sell-off. On the other hand, the first quarter is in the history books now, and more recent results indicate that NIO is rapidly growing its vehicle delivery pace.
Impressively, NIO delivered 15,620 vehicles in April 2024, up 134.6% year-over-year. That’s more than half of the vehicles NIO delivered in all of the first quarter. Even better than that, NIO delivered 20,544 vehicles in May, representing a whopping 233.8% year-over-year increase.
It’s surprising that NIO’s shareholders would obsess about what happened in January through March when the company did so much better in April and May. Furthermore, they have robust expectations for 2024’s second quarter overall, as NIO guided for 54,000 to 56,000 vehicle deliveries, up 129.6% to 138.1% year-over-year.
As The Wall Street Journal summed it up, NIO “reported sharply higher sales in April and May after it lowered battery costs for consumers and launched new models.” It certainly sounds like NIO’s strategy is working.
We’ll certainly discuss NIO’s first-quarter financial results since investors should take all of the relevant data into consideration. I’ll acknowledge that it wasn’t a stellar quarter for NIO, but the market should have known that already. If some traders are panic selling NIO stock due to old news, and if they’re disregarding a potentially great second quarter, then I feel that there’s no urgent need to offload your own shares right now.
NIO: Look to the Future, Not the Past
Frankly, it looks like some short-term traders are basically driving while looking in the rear-view mirror. They should look at the road that’s ahead of them, as NIO is trying to tell investors that the current quarter will be amazing.
This doesn’t mean that we can afford to ignore the past. It’s worth noting that NIO’s first-quarter 2024 revenue declined 7.2% year-over-year to RMB 9.9086 billion or $1.3723 billion. Moreover, this result fell short of the analysts’ consensus estimate of RMB 10.44 billion.
Also, NIO’s quarterly adjusted (non-GAAP) net earnings loss of $0.33 per share (or, more accurately, per American Depository Share or ADS) missed Wall Street’s consensus call for a loss of $0.30 per ADS. The Wall Street Journal explained that NIO’s less-than-ideal first-quarter results occurred as “China’s EV market had a bumpy start to the year, weighed by subdued consumption in the first quarter and the Lunar New Year holiday.”
The Lunar New Year holiday shouldn’t present major problems for the remainder of the year. Besides, NIO sounds confident about the current quarter. The automaker’s outlook calls for Q2-2024 revenue in the range of RMB 16,587 billion ($2.297 billion) to RMB 17.135 billion ($2.373 billion). If that prediction turns out to be correct, then NIO’s current-quarter revenue will increase by around 89.1% to 95.3% year-over-year.
Finally, I should also acknowledge that analysts aren’t pounding the table very hard on behalf of NIO and NIO stock. They’ll probably end up revising their share-price targets lower in the coming days, so don’t be too surprised if that happens. For now, though, we can see what Wall Street expects in regard to the NIO share price over the next 12 months.
Is NIO Stock a Buy, According to Analysts?
On TipRanks, NIO comes in as a Moderate Buy based on five Buys, six Holds, and one Sell rating assigned by analysts in the past three months. The average NIO stock price target is $6.65, implying 34.75% upside potential.
Conclusion: Should You Consider NIO Stock?
NIO had a rocky first quarter, but stock traders really ought to have known about this by now. As some folks obsess about old news, enterprising investors can look toward NIO’s current and future results in 2024, which could indicate rapid growth.
In other words, there’s no need to give up on NIO just because some people are selling their shares. In the final analysis, I’m seeing a great opportunity with NIO stock and would consider purchasing a few shares today.
