NIO Earnings Preview: Here’s What You Need to Know (BULLISH)
Chinese electric vehicle (EV) maker NIO Inc. (NIO) is on a massive expansion drive in 2022. The company is scheduled to release its fourth-quarter and full-year 2021 earnings results on March 24, 2022, after the market close, and investors eagerly wait to see if the upcoming financial data update justifies bullish ratings on NIO stock.
NIO's Record High Deliveries to Lift Q4 Revenue
The EV maker remains committed to providing monthly updates on vehicle deliveries. Vehicle deliveries during the fourth quarter amounted to 25,034 vehicles - a new record-high quarterly delivery in the company's history. Fourth-quarter deliveries represented a 44.3% year-over-year increase. Deliveries reached 24,439 vehicles during the third quarter.
NIO delivered 91,429 vehicles during the year 2021, a strong deliveries growth rate of 109.1% year-over-year. Fourth-quarter vehicle deliveries were well within management guidance range, well upper range, a sign that the company will likely report revenue within the anticipated range. Revenue should surge as deliveries grow.
Revenue Estimates for NIO Show Sequential Decline
Back in November, management at NIO provided fourth-quarter revenue guidance for between $1.48 billion and $1.60 billion, representing an increase of 41.2% to 52.2% year-over-year and either a sequential decline of 4.4% or an increase of 3.1% from the previous quarter.
Wall Street analysts currently project RMB 9,75 billion ($1.53 billion) revenue for NIO's fourth quarter. Revenue for the third quarter was RMB 9.8 billion. Analyst estimates imply a sequentially softer revenue performance during the fourth quarter, despite higher deliveries.
Perhaps market watchers see sequentially lower "Other" revenue from charging, battery swaps, and sales of regulatory credits. The company's "Other" revenue segment was the fastest-growing after a 118% sequential sales growth to $181.4 million (12% of quarterly revenue) during the third quarter.
Analysts expect -$0.14 per diluted share for the fourth quarter, which could show an improvement from the previous year's $1.05 loss per share.
Importantly, NIO has beaten analysts' EPS forecasts over the last two consecutive quarters.
Key Revenue Drivers for NIO in 2022
Product portfolio growth, geographical expansion, and the global chip supply situation may drive the company's revenue performance in 2022.
NIO's vehicle sales accounted for 88% of total revenue during the third quarter of 2021. Since releasing its first EV model in 2016, the EP9, NIO has grown its product portfolio to three current models, the ES8, the ES6, and the EC6.
The company unveiled a mid-sized smart EV sedan in December last year, the ET5, which will be available to the Chinese market in September 2022. Investors expect three new model launches this year.
Order confirmations for a new flagship model, the ET7 have already started, and deliveries will commence on March 28, 2022. The company unveiled the ET7 in January last year.
Unlike its immediate competitor Li Auto (LI), which is a bit reserved about launching new models, NIO is taking an aggressive growth stance. It's launching new models at varying price points to capture a larger diversified driver base.
The company will continue to expand its charging and battery swapping network in 2022. It plans to launch sales in Germany, the Netherlands, Sweden, and Denmark this year. By 2025, NIO expects to have a presence in over 25 countries and regions worldwide.
Product portfolio growth and geographical expansions will unlock new growth potential for NIO this year. Improved chip supplies could boost productivity across the whole EV manufacturing industry globally.
The Future Looks More Derisked
Until recently, NIO stock was listed only on the New York Stock Exchange. The risk of Chinese stocks being delisted from U.S. exchanges was uniquely significant to it. This is no longer the case.
NIO finally listed its shares on the Stock Exchange of Hong Kong (SEHK) on March 9, 2022. Hong Kong-listed shares are fully fungible with the American depositary shares (ADSs) listed on the NYSE.
Investors have another venue to continue trading in NIO stock if Chinese shares leave American markets.
Wall Street's Take
Turning to Wall Street, NIO earns a Strong Buy consensus rating from Wall Street analysts based on 10 Buys vs. 2 Holds. At the time of writing, the average NIO stock price target of $51.14 represents 176.4% upside potential over the next 12 months.
Investor Takeaway
NIO's future looks brighter as the company increases its production footprint, expands its product portfolio, and widens its geographic reach. More so as the world increasingly embraces electric vehicles as it fights the harsh realities of global climate change.
That said, NIO is still a Chinese company that faces unique equity risks not shared with U.S. and European EV stocks. Geopolitical tensions may potentially suppress its valuation for longer.
However, shares could rally should there be any breakthroughs on the U.S. and Chinese regulatory impasse regarding outstanding audit-related issues.
A listing on the Hong Kong market acts as a hedge should the worst happen.
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