Preview of the week starting 05Jun2023 ~ can NIO beat the market expectations?

Public Holidays

Nil for Singapore, Hong Kong, China & USA

Economic Calendar (05Jun2023)

Economic Calendar for the week starting 05Jun2023

Notable Highlights

• Jobless claims. Initial jobless claims will be announced on Thursday. This would form important data points for the Fed to decide on the next interest rate adjustment.

• PMI updates from the US - This reflects the US domestic manufacturing outlook and can be a good reference for the market outlook. For this week, the PMI is for services from May 2023.

• Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, this implies demand erosion that can lead to reduced production & weakening consumer spending. The last crude oil saw a bigger drawdown than expected.

Earnings Calendar (05Jun2023) - can NIO beat the expectations?

Earnings for the coming week starting 05 June 2023

As the earnings season reaches the end, there are a few companies of personal interest for this week’s earnings namely, Gamestop (one of the Meme stocks), Docusign and NIO.

Summary of NIO (provided by Google Bard)

Here is a summary of the earnings for NIO for the last 5 years:

• 2022: NIO reported a net loss of $1.2 billion in 2022, compared to a net loss of $4.9 billion in 2021. The company's revenue increased by 103% year-over-year to $10.2 billion.

• 2021: NIO reported a net loss of $4.9 billion in 2021, compared to a net loss of $1.8 billion in 2020. The company's revenue increased by 100% year-over-year to $5.7 billion.

• 2020: NIO reported a net loss of $1.8 billion in 2020, compared to a net loss of $1.4 billion in 2019. The company's revenue increased by 146% year-over-year to $2.8 billion.

• 2019: NIO reported a net loss of $1.4 billion in 2019, compared to a net loss of $1.1 billion in 2018. The company's revenue increased by 265% year-over-year to $1.4 billion.

• 2018: NIO reported a net loss of $1.1 billion in 2018, compared to a net loss of $1.2 billion in 2017. The company's revenue increased by 1,073% year-over-year to $1.1 billion.

NIO's earnings have been volatile in recent years, but the company has shown strong revenue growth. NIO is one of the leading electric vehicle companies in China, and it has the potential to be a major player in the global EV market.

Here are some of the factors that have contributed to NIO's growth:

• The growth of the Chinese electric vehicle market: The Chinese government has been promoting the use of electric vehicles, and this has led to a surge in demand for EVs in China.

• NIO's strong product lineup: NIO has a strong product lineup, which includes the ES8, ES6, and EC6. These vehicles have been well-received by consumers, and they have helped NIO to gain market share.

• NIO's strong brand: NIO has a strong brand, and it is seen as a premium EV brand in China. This has helped NIO to command higher prices for its vehicles.

NIO faces a number of challenges, including:

• The competition from other EV companies: There are a number of other EV companies in China, and they are all vying for market share.

• The cost of production: The cost of producing EVs is still high, and this could put pressure on NIO's margins.

• The global chip shortage: The global chip shortage has affected the automotive industry, and this could impact NIO's production.

Overall, NIO is a growth company with a bright future. The company has a strong product lineup, a strong brand, and a growing market. However, NIO faces a number of challenges, including competition from other EV companies, the cost of production, and the global chip shortage.

My muse about NIO

For the coming earnings, the market (investing) has a forecast of -2.63 and 11.93B for NIO’s EPS and revenue respectively. From the current trend, NIO continues to make a loss despite increased revenue. Could it be they have yet to reach critical mass or they are unable to bring their costs under control?

Personally, I have sold off my positions in NIO and have directed my investments into Tesla and BYD. Personally, I prefer to consider investing again after the company manages to break even. For now, I have concerns about the increased net income losses that they have incurred.

News and my muse ~ student debt, layoffs, Population

• According to stats compiled by the Federal Reserve Economic Data (FRED) system, depositors yanked $30 billion out of American bank accounts from May 10th through May 17th.

• <Franknez> JP Morgan laid off 1000 from its recently acquired First Republic Bank.

People aren’t even forced to pay their student loans yet, that starts in August, and 60 day car loan delinquencies are highest ever.

• <CNN> <Home Price> The 10-City Composite showed an annual decrease of -0.8%, which was down from 0.5% increase in the previous month. The 20-City Composite posted a -1.1% year-over-year loss, down from a 0.4% gain in the previous month.

• The next snowball to hit ~ student debt

• <WSJ> Business Is Slowing. So Companies Are Juicing Profits.

  Companies have long engaged in earnings management, by which executives use the flexibility in accounting rules to improve reported earnings per share

• <WSJ> Why Your Steak Is Getting Pricier

  U.S. beef production is on track to drop by more than 2 billion pounds in 2024, the biggest annual decline since 1979, according to Agriculture Department data.

• <WSJ> A Breakdown of America’s Stagnating Number of Births

  The total fertility rate—closely watched because a level of 2.1 children per woman is the “replacement rate” needed for a population to maintain current levels—was 1.665 in 2022

• <Fortune> On Wednesday, independent reporter Colin Wu tweeted that Binance could be laying off as much as 20% of its 8,000-employee workforce

• <Visual Capitalist> In 2022, there were 771 million people aged 65+ years globally, almost 10% of the world’s population.

  This segment has been growing at an increasing rate, and it’s expected to hit 16% in 2050, and eventually 24% by 2100.

Despite the increase in non-farm employment, there are more people who are unemployed.

Market Outlook - 05 Jun 2023

Rhe average volume of the S&P500 at 4.272B and the volume from the last trading day (02 Jun 2023) is 2.730B.

S&P500 1D chart dated 04 June 2023

Technical observations of the S&P500 1D chart:

• The stochastic indicator is on an uptrend and is approaching the overbought region (80).

• The MACD indicator is trending upwards.

• Moving Averages (MA). The MA50 is on an uptrend. The MA200 line is turning flat and there could be a trend change coming up. With the last candle being above both the MA50 line and MA200 lines, this can be interpreted as an uptrend in the mid-term and the long-term.

• Exponential Moving Averages (EMA). The lines are on an uptrend and imply an uptrend in the short term.

• Note the average volume of S&P500 at 4.272B and the volume from the last trading day (02 Jun 2023) is 2.730B. Is S&P500 losing momentum for its current climb?

My investing muse

Unemployment Data

The latest unemployment data was released on Friday (2nd June 2023):

• Average hourly earnings (MoM) actual is 0.3% compared to the forecast of 0.4%

• Nonfarm payrolls actual is 339K compared to the forecast of 180K

• The unemployment Rate actual is 3.7% compared to the forecast of 3.5%

Despite the increase in nonfarm payroll (employment), there are more people who are unemployed.

Debt Ceiling

The US has approved the rise of the debt ceiling. Essentially, the can was kicked further down the road for a country that could not be spent within its means. To meet the shortfall, the US will issue bonds and treasury bills so that they can pay for their various expenses. Some of the bonds that have expired would be re-financed with the current interest rates. It does not seem that the US can pay back the capital anytime soon as the new debt limit gives a buffer of USD $4 trillion.

This is solved for the next few years by borrowing money in the future, serviced by generations of American citizens. I feel bad cause the future has inherited debt from a government that is unable to spend within its means.

Conclusion

The bear looks to be crushed by the current bullish run. Note that we are losing volume in the S&P500 and the current bull should be losing momentum. There could be some profit-taking and correction as some of the stocks enter the “overbought” region. I think that AI will be a vital part of our future but it is too early to name the winners.

As always, I recommend caution and taking some profits off the table. The profits on paper need to be realized.

@TigerStars

$S&P 500(.SPX)$

$NIO Inc.(NIO)$