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Earnings Preview: Is it time to buy the dip in NIO?

NIO

NIO, the so-called “Chinese Tesla” is to report its earnings after the Hong Kong markets close and before the US markets open late today. The EV maker has lost 72% of its market value in 2022 due to supply chain disruptions, weakened demands and global headwinds. Its shares erased most of the January gains after the company reported a disappointing delivery number. Despite a miss on the production expectations, NIO’s revenue is expected to jump in the fourth quarter, which may promote positive guidance for the new year.

A strong third-quarter revenue

NIO reported strong revenue growth of 32.6% at $1.85 billion in the third quarter of 2022. But its loss per share widened to 30 cents from 6 cents a year ago. CEO William Bin Li said its new ET5 sedan has seen strong demand, which “will support a substantial acceleration of our overall revenue growth in the fourth quarter”.

A miss on the fourth quarter delivery number

NIO delivered 40,052 electric cars in the further quarter, well below its initial guidance of between 43,000 to 48,000 vehicles, but above the updated guidance of 39,000 in late December as China’s Covid surge caused supply-chain disruptions.  In January, the company only delivered 8,506 vehicles, down 46% from December, consisting of 2,190 premium smart electric SUVs, and 6,316 premium smart electric sedans.

Consensus for NIO’s Q4 earnings

According to FactSet’s estimate, NIO’s loss per share will widen to 26 cents per ADR share from 17 cents a year ago, but its revenue is expected to grow to 2.5 billion, or a 58% jump from a year ago, which will also mark its first $2 billion quarter after the company topped $1 billion revenue in the fourth quarter 2020.

A better outlook

For the fiscal year 2023, NIO is expected to lose 66 cents per share, narrowed from an estimated loss of 97 cents in 2022. Its revenue is seen to rise 84% in the new year. China’s EV sales account for about 2 thirds of global market shares. With China’s reopening, EV sales are expected to rebound sharply.

Technical analysis 

Click to enlarge the chart

Source: CMC Markets NG as of 1 March

NIO’s shares have been moving under a descending trendline, with near-term resistance at the 20-day moving average (MA) of $10.50. RSI has entered oversold territory, suggesting an imminent rebounding opportunity towards the trendline resistance, also confluence with the 20-day MA. A bullish breakout of this level may take the share’s price to further test the resistance between $12-$13, which is the high seen in late January.

On the flip side, a breakdown below the key support of $8.4 at the low on 24 October may crash the shares towards $5. 


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