Time to invest in NIO before it's $9 or higher ?
On 19 Nov 2023, I have posted an estimation on NIO’s Q3 2023 earnings.
Nio Q3 earnings better than Li Auto & Xpeng? Read & decide. — click on title to read.
Now that earnings results are out, it is timely to look at its actuals.
Reportedly, $NIO Inc.(NIO)$ narrowed its losses in third quarter earnings.
NIO’s Q3 2023 Earnings:
Vehicle margin: 11.0% versus 16.4% YoY versus 6.2% (Q2 2023).
Price slashing competition (started by $Tesla Motors(TSLA)$) has reduced margins for all EVs in China.
Revenue: RMB 19.1 Billion (USD 2.7 Billion) versus RMB 19.4 Billion expected. Missed the mark by 0.3 Billion or RMB300,000.
Revenue rose by +47% YoY.
Gross profit: RMB1,523.3 Million (US$208.8 Million), a -12.2% dip YoY and +1,650.9% gain compared to Q2 2023.
Gross margin: 8.0% versus 13.3% YoY versus 1.0% in Q2 2023.
Net loss: RMB4,556.7 Million (US$624.6 Million), a +10.8% gain YoY and -24.8% dip compared to Q2 2023.
Loss per share: -RMB 2.67 per share loss versus -RMB 2.91 loss expected versus -RMB3.70 (Q2 2023’s loss per share).
Overall, Q3 2023 results is much better than Q2 2023.
Overall YoY comparison, some results are better (vehicle sales & total revenue).
For YoY comparison, the results that are not as ideal (vehicle margin, gross profit, gross margin, loss per share, non-GAAP, net loss and adjusted net loss).
Looking ahead and into 2024, what are the latest development is instore for NIO?
(1) NIO’s Q4 delivery.
The last quarter is very important for every publicly listed company.
It is the last opportunity to play catch up.
For October, NIO delivered 16,074 vehicles.
For November, NIO delivered 15,959 vehicles.
Based on CFO initial projection of 250,000 EVs in early 2023, NIO is unlikely to hit the overzealous target.
On a brighter note, NIO has already delivered +20,458 EVs more than 2022 total delivery.
(2) Focus on efficiency.
NIO hit rock bottom on its Q2 2023 results, that crashed NIO’s stock price.
For Q3 2023, It managed to improve its earnings significantly.
However, the results are weaker compared to its YoY earnings.
Addressing the concerns during the earnings conference, CEO Li Bin informed that NIO would defer or terminate projects that would not bring a financial contribution in the coming 3 years.
(3) In-house manufacturing.
On Tue, 05 Dec 2023, NIO announced that it has entered into an agreement to acquire certain manufacturing equipment and assets from Jianghuai Automobile Group Corp. (JAC) — NIO’s outsource EV manufacturer for RMB 3.16 Billion.
Bringing manufacturing in-house will help NIO to “reduce” manufacturing expenses by 10%.
(4) Q4 2023 earnings forecasts.
Vehicle delivery: Endeavour to deliver between 47,000 and 49,000 EVs in Q4 2023.
Vehicle margin: Management team endeavours to further improve its margin to 15%, up +4% from 11% (Q3 2023).
Revenue: Forecast to be between RMB 16.1 Billion and RMB 16.7 Billion, representing a YoY increase of between 0.1% to 4.0%.
(5) Collaboration & Spin-off.
NIO has undergone a “transformation” of sort lately.
Instead of flying solo on their projects, NIO has turned to collaboration, partnership and even spin-off, to speed things along and avoid taking on all the risks & liabilities solo.
On 21 Nov 2023, NIO and Changan signed an agreement to build and share battery swapping stations; and in the process standardizing EV batteries.
On 29 Nov 2023, NIO and Geely Holding Group signed a strategic partnership agreement on battery to establish an efficient battery asset management mechanism, build a unified battery swap operation and develop battery swappable vehicles compatible with each other's battery swap systems.
In its effort to reduce “unnecessary” expenses, NIO is mulling to spin off its Battery unit production. (see above)
Target timeline to complete this exercise by end 2023.
My viewpoints.
I like the partnerships and collaborations. They are modern business modelling approach.
Flying solo in every project entails too many risks.
Instead partner or collaborate, with the “best” in the industry helps to mitigate risks. The pie is big enough to feed many.
INIO management needs to follow through on all that they have mentioned during earnings’ call:
Keeping costs at bay.
Ramp up sales & production, to meet demand.
Reduce delivery waiting time.
Additionally, I think NIO needs to more transparent about its Europe ventures and progress. The cost per country penetration needs to be accounted, for its overseas team as well.
Will NIO reach $9?
Answer is “No” and “Yes”.
I do not think that NIO will hit $9 by end 2023; not unless all speculators pull their resources together and artificially inflate its price, before taking profit.
When NIO Management is able to:
Continue to improve on its Q4 earnings & all subsequent quarter earnings.
Show proof that remedial action plan is bearing fruits.
Then the conviction of $9 per share gets stronger automatically.
Do you think NIO will be able to regain the $9 share price?
Do you think NIO will be able to keep all necessary improvements in-pace?
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