NIO Inc. stock was rising after the Chinese electric vehicle maker reported a narrower-than-expected second quarter loss Thursday.
It posted a loss of 30 cents a share on sales of $2.4 billion. Wall Street was expecting a loss of 31 cent a share on sales of $2.4 billion, according to FactSet. A year ago, NIO lost 45 cents a share from sales of $1.2 billion.
NIO delivered 20,498 and 20,176 vehicles in July and August 2024, respectively.
“In the second quarter of 2024, NIO achieved a record-breaking delivery of 57,373 premium smart electric vehicles, securing over 40% of the market share in the battery electric vehicle segment priced above 300,000 [yuan] in China,” CEO William Bin Li said in the earnings release.
For the third quarter, NIO sees sales between $2.63 billion and $2.71 billion. It expects deliveries of vehicles between 61,000 and 63,000 units.
NIO’s America-listed shares were up about 5% to $4.45 in premarket trading Thursday. By Wednesday close, the stock had fallen about 54% so far this year.
NIO stock might be due for a bounce—relative to some of its peers. Earnings could be a catalyst.
Chinese EV maker NIO is set to report second-quarter earnings on Thursday morning. For the second quarter, Wall Street is looking for a per-share loss of 31 cents from sales of $2.4 billion, according to FactSet. A year ago, NIO lost 45 cents a share from sales of $1.2 billion.
Sales are expected to double as second-quarter deliveries hit 57,373 vehicles, up roughly 140% year over year. Growth is good, but delivery volumes growing faster than sales is a sign that pricing is weakening. Falling prices amid fierce EV competition have been afflicting Chinese EV investors for months.
Through Wednesday trading, NIO shares were down about 54% year to date.
Along with current results, NIO management should provide some guidance for the third quarter. Management guided second-quarter delivery volumes of 54,000 to 56,000 vehicles. The company delivered more than 57,000. NIO delivered almost 41,600 cars in July and August. Wall Street is looking for third-quarter deliveries to total some 57,000 cars, according to Bloomberg.
NIO’s earnings come after results from several peers including XPeng Inc.. Citi analystJeff Chungpointed out in a recent report that he expects the valuation of NIO and XPeng to converge, creating an arbitrage opportunity. He favors owning NIO stock and selling XPeng shares.
Simply put, XPeng shares are more expensive, he says, trading for about 0.9 times his estimated 2025 sales. NIO trades for about 0.6 times sales. A strong earnings report could help close the gap. Improving gross profit margins is another reason Chung cited.
Wall Street expects NIO’s gross profit margin to hit about 11% in the third quarter after coming in at an estimated 9% in the second quarter. XPeng’s gross profit margin is expected to be about 14% in the third quarter, similar to the second-quarter level.
An arbitrage-type trade needs to have investors long one stock and short the other. It might be difficult for most investors to set up the trade if they aren’t familiar with shorting stocks—borrowing shares that an investor doesn’t own and selling them.
It can be risky. There is no guarantee the valuation gap will close and if XPeng shares rise, it means a loss for the shorting investor.
Still, the valuation gap is worth noting.
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