NIO: EV Slump Won't Last

seekingalpha01-30

NIO has seen its stock slump to $6 despite record production and signs of further growth in 2024.The company delivered 50,045 vehicles in Q4, slightly below Q3 records, but the amount surpassed the ...

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LateWizard
01-30
LateWizard
Sounds like someone who buy at the peak 🤭🤭
D1234
01-30
D1234
Holding power, a significant Role🙏🙏

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2024.The company delivered 50,045 vehicles in Q4, slightly below Q3 records, but the amount surpassed the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4665792-nio-ev-slump-wont-last\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0640476718.USD","symbol_name":"THREADNEEDLE (LUX) US CONTRARIAN CORE EQ \"AU\" (USD) ACC","start_time":0,"source_url":"https://seekingalpha.com/article/4665792-nio-ev-slump-wont-last","article_id":"2407825976","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2407825976","pubTimestamp":1706585994,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"NIO has seen its stock slump to $6 despite record production and signs of further growth in 2024.The company delivered 50,045 vehicles in Q4, slightly below Q3 records, but the amount surpassed the 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Way/iStock Editorial via Getty ImagesNIO Inc. (NYSE:NIO) has been squeezed by negativity surrounding both the Chinese economy and electric vehicles (\"EVs\") market. The stock has slumped to only $6 despite record production in the 2H'23 and signs of further ramps in 2024 with move into sub-brands. My investment thesis is again ultra Bullish on the stock after the dip back down to the lows.Source: FinvizUpwardsNIO ended 2023 on a high note with December vehicle deliveries at 18,012. The Chinese EV company rebounded 13% from only 15,959 vehicle deliveries in November.Source: CnEVPostAfter a few very volatile years, NIO finally took production to the next level with the launch of the ES6 vehicle during the Summer. The EV company topped 20K vehicles for the first time in July and was able to keep monthly production levels around the 15K prior high from the end of 2022.The quarterly deliver number has shown far more consistent growth with NIO delivering 50,045 vehicles in Q4. The number was just below the record delivery total of 55,432 in Q3'23.Source: CnEVPostBoth quarters were far above the prior record of 40,052 vehicle deliveries back in Q4'22. The quarter was nearly 10K units above the prior quarterly vehicle delivery record. In essence, NIO delivered nearly 20K vehicles more than any other quarter outside of Q4'22.The irony is that the stock trades at the all-time lows while vehicle deliveries are far above prior levels. When NIO was reporting prior record levels, the stock was trading at nearly $20 in a sign of how the market isn't in touch with actual results.NIO hasn't always hit corporate targets, but the Chinese EV company has grown quarterly vehicle production from below 10K when Covid hit in 2020 to over 50K units now for 400%+ growth during the 3-year period.The company is now expanding production into sub-brands to enter the lower cost vehicle markets. NIO estimates the company controls over 40% of the ultra premium market.The Alps brand has a targeted price of $28K and NIO will start sales at some point during 2024. Apparently, the company will strip out some of the self-driving capabilities replacing the Nvidia (NVDA) chips with an internal developed chip while also stripping out the Lidar for a cheaper camera based system similar to what Tesla (TSLA) uses for the full-self driving, or FSD, concept. Also, NIO expects the battery swap technologies to provide a boost to more mass market brands due to the lack of home chargers for a consumer base living more in an urban environment and apartments.The Alps brand will apparently start with an SUV with targeted starting price at the RMB 200,000 ($28,000) level and up to - RMB 250,000 market. Li Auto (LI) thrives at slightly higher auto prices and is targeting 800K units in 2024 while NIO thinks the driving assistance offered in the lower-priced vehicles will provide an advantage.NIO appears set to launch the Alps model with the potential for much higher volumes, which could help contribute to more positive sentiment for the stock. The Chinese EV leader in the premium sector naturally sales less vehicles considering the just unveiled executive flagship sedan ET9 has a pre-sale price of RMB 800,000, or roughly $112,150.Margin FocusA big aspect of the Q3'23 quarter reported in early December was an updated look at the financials. The company finally boosted vehicle production to new record levels, but also NIO focused on cutting costs to get the EV business closer to sustainable cash flows.The company reported record sales of $2.6 billion in the quarter and boosted vehicle margins back to 11.0% on $2.4 billion in vehicle sales. NIO hasn't completely recaptured the vehicle margin of the prior highs, but the company is producing a similar gross profit to cover fixed costs due to the higher vehicle sales, though other sales had a negative margin pushing the overall gross margin down to just 8.0%.NIO lost $541 million in Q3 and the recent cost cuts weren't factored into these losses. The company announced plans to cut operating costs by up to 10% back in November and the non-GAAP operating expense base was $832 billion in the quarter.The biggest issue facing NIO is that a huge deficit exists between the gross profit just topping $200 million and the operating expense base, even after a 10% cut. NIO needs $4 billion in quarterly revenues with a 20% vehicle margin in order to cover the current operating expense base, even if quarterly operating expenses were actually cut to below $750 million.On the Q3'23 earnings call, the CFO guided to a Q4'23 vehicle margin of 15% with a 2024 target in the 15% to 18% range. Anything closer to 20% will set up the company to head towards the breakeven level, though the company will need substantial vehicle sales growth while maintaining the higher margins on the sub-brand vehicle sales.Analysts forecast 2024 revenues of $11 billion with quarterly sales approaching $3 billion during Q4. As mentioned above, NIO would only deliver a gross profit of $600 million during the December quarter on a 20% vehicle margin while the company suggested the target is possibly just 18% this year.NIO launched the new flagship model vehicle with a release date in March. Vehicle sales will probably be weak during Q1 with 2023 model prices apparently being slashed and other consumers waiting for the new model to buy a NIO EV.The company ended September with a cash balance of $6.2 billion and NIO closed the equity investment from CYVN during December providing another cash infusion of $2.2 billion. The investment vehicle based in Abu Dhabi will own 20.1% of NIO after acquiring the 294 minion additional shares at $7.50 per share.NIO now has over $2 billion shares outstanding with a market cap just below $13 billion. The Chinese EV company has sales targets topping $10 billion making the stock relatively cheap.NIO needs to eliminate the losses via higher vehicle margins and lower operating expenses, which will show up in 2024. The combination of 15%+ vehicle margins and 10% lower operating expenses will squeeze several hundred million out of the quarterly losses. The stock will be far more appealing with the large cash balance more secure from being burned away via ongoing massive operating losses.TakeawayThe key investor takeaway is that NIO is slowly building a strong brand in the Chinese EV market. The Chinese economy and overall EV weakness have hit the stock, but the company has a solid plan for cutting losses to more sustainable levels to allow the massive plans for a new sub-brand development, along with a charging swapping station network, to reach fruition.Investors should use the ongoing weakness to snap up NIO.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":268627088773288,"gmtCreate":1706605422959,"gmtModify":1706605427081,"author":{"id":"3576797853255359","authorId":"3576797853255359","name":"LateWizard","avatar":"https://static.tigerbbs.com/2623f0ebfedf9dedaf6b68dc8fe2f4b8","vip":1,"crmLevel":3,"crmLevelSwitch":1,"idStr":"3576797853255359","authorIdStr":"3576797853255359"},"htmlText":"Sounds like someone who buy at the peak 🤭🤭","listText":"Sounds like someone who buy at the peak 🤭🤭","text":"Sounds like someone who buy at the peak 🤭🤭","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/268627088773288","repostId":2407825976,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":268622966468744,"gmtCreate":1706604252805,"gmtModify":1706604257450,"author":{"id":"3573810296615865","authorId":"3573810296615865","name":"D1234","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3573810296615865","authorIdStr":"3573810296615865"},"htmlText":"Holding power, a significant Role🙏🙏","listText":"Holding power, a significant Role🙏🙏","text":"Holding power, a significant Role🙏🙏","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/268622966468744","repostId":2407825976,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":15,"commentSize":2,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2407825976"}