To The Moon

$NIO Inc.(NIO)$

Company Overview

NIO is a Chinese electric vehicle company focused on designing and developing premium EVs, including electric SUVs and sedans. Known for its innovative battery swapping technology, NIO offers a unique approach to electric vehicle ownership. The company operates globally, primarily in China, and has made significant inroads in the high-end EV market. In recent years, NIO has expanded its model lineup and improved its financial metrics, including production capacity and market share in the BEV sector.

Earning Overview

NIO's Q3 2024 results revealed a revenue of 18.67 billion yuan ($2.66 billion), which marked a 2.1% decline year-over-year but a 7% increase from the previous quarter. Vehicle deliveries grew by 11.6% year-over-year to 61,855 units. The company's gross margin improved to 10.7%, driven by a boost in vehicle margin to 13.1%. Despite these improvements, NIO posted an adjusted loss per share of 2.14 yuan (about 31 cents), slightly better than last year's loss of 2.28 yuan​

Valuation

NIO is currently valued at around $10 billion, a relatively low valuation compared to its potential, given its position in the EV market. Its price-to-sales ratio is 1.01, suggesting that the stock may be undervalued compared to its revenue.Despite strong future prospects, NIO has been under pressure in the market, with its stock price falling 38.7% over the last year.

As of Q3 2024, NIO's market capitalization stands at around $10 billion​. The company reported a 2.1% decline in total revenue to $2.66 billion for the quarter​. Despite the drop in revenue, NIO managed to see a significant 11.6% year-over-year increase in vehicle deliveries, reaching 61,855 vehicles​. This growth in deliveries helped improve vehicle margins to 13.1%, contributing to a gross margin of 10.7%, up from 8.0% in the same period last year​. However, NIO still posted a wider-than-expected net loss of approximately $732.7 million for Q3​. Looking forward, the company has shown optimistic guidance for Q4 2024, expecting continued growth in vehicle deliveries. Additionally, NIO remains strong with over $6 billion in cash reserves.

Fundamental Analysis

Revenue and Growth

NIO’s total revenue for Q3 2024 came in at $2.66 billion, marking a 2.1% decrease year-over-year. However, the company saw a notable quarter-over-quarter growth of 7%, reflecting some resilience amid a challenging market. The decline in revenue was largely attributed to lower vehicle sales, though the increase in vehicle deliveries (11.6% YoY to 61,855 units) helped cushion this decline.

Profitability and Margins:

While NIO is still posting losses, there have been improvements in profitability metrics. Its gross margin improved to 10.7%, up from 8.0% a year ago, driven by a better vehicle margin of 13.1%​. Despite these improvements, NIO continues to report losses, with an adjusted loss per share of $0.31 in Q3 2024.

Market Share and Strategy:

NIO remains a strong player in China’s premium EV market, securing over 40% of the BEV market share for vehicles priced above RMB 300,000​. NIO's strategic focus on high-end vehicles and its unique battery swapping technology provide a competitive edge in the growing electric vehicle sector. However, this premium positioning also means NIO faces strong competition from both domestic players and international entrants like Tesla.

NIO is currently valued at around $10 billion, a relatively low valuation compared to its potential, given its position in the EV market. Its price-to-sales ratio is 1.01, suggesting that the stock may be undervalued compared to its revenue.

Technical Analysis

Nio's stock experienced significant volatility in Q3 2024, demonstrating both strong operational progress and mixed market reactions. The company reported impressive year-over-year growth in vehicle deliveries and a solid financial performance, but its softer-than-expected revenue guidance raised concerns among investors. While vehicle sales surged 118.2% YoY, reaching $2.16 billion, Nio's total revenue of $2.66 billion for Q3 just edged past estimates.

Technically, Nio's stock has been forming a descending triangle pattern, with resistance levels tightening until a breakout triggered after its earnings release. The stock surged past key resistance levels, notably breaking through the $3.98 trendline to reach $5.18. However, despite this positive momentum, the stock's current performance is still subject to broader market concerns, particularly over competition in the EV sector and pricing pressures.

Looking ahead, analysts are cautious about Nio's future, with expected deliveries for Q4 forecasted to drop significantly. However, the company's projected revenues fall short of Wall Street's expectations, which could weigh on its stock price​.

If Nio can maintain its delivery growth and demonstrate continued operational improvements, it may regain investor confidence.

Conclusion

NIO’s fundamentals reflect a company with a growing presence in the electric vehicle market, supported by a strong cash position and growing deliveries. However, profitability remains elusive, and its high debt levels and ongoing losses are concerns for investors. The company’s focus on the premium segment and its battery swapping technology are positive drivers, but competition and macroeconomic challenges could impact future growth. Investors should keep an eye on NIO’s ability to scale production and manage its losses as it navigates a competitive landscape.