Electric vehicle (EV) maker NIO [NIO] finished 2021 in a strong position. The company delivered 25,034 vehicles in the three months to the end of December, narrowly surpassing the top end of its forecast of between 23,000 and 25,000 units. Not only did it represent an increase of 44.3% from the fourth quarter of 2020, but it was also a record quarterly high and meant total deliveries for the year were up 109.1% at 91,429.
However, the record-high numbers, which were published in a trading update on 1 January, didn’t help the NIO share price to move up a gear. Based on Monday’s closing price, the stock had fallen 36.5% year-to-date to $20.26.
The stock has been highly volatile over the last few weeks as US-listed Chinese stocks have been caught up in a broader sell-off over American depository receipt (ADR) delisting fears. The NIO share price dipped to a 52-week low of $13.01 on 15 March but closed the trading week 60% higher. As of 21 March, the stock is trading around 60% off the 52-week high of $55.13 that was recorded on 1 July 2021.
Supply chain issues fail to derail record deliveries
The company was able to post record deliveries amid supply chain issues, which “remain challenging,” NIO chairman and founder, William Li, said on the third quarter 2021 earnings call in November.
The third quarter saw deliveries of 24,439 vehicles but deliveries dropped to only 3,667 in October as the company made changes to its manufacturing process. “Our supply chain team and partners have adopted a series of measures to support the record-high quarterly deliveries in the third quarter, and will continue to do so,” Li said.
Revenue for the third quarter of 2021 was $1.52bn, up 116.6% year-on-year, on a loss of $0.28 per ADR share, or $440.6m. This was significantly wider than the $0.15 per-share loss in the year-ago quarter due to higher operating expenses.
Looking ahead to its upcoming earnings call, NIO provided Q4 revenue guidance of between $1.45bn and $1.57bn, which would mark a year-on-year increase of between 43% and 55%. The consensus among analysts polled by Yahoo Finance is $1.53bn, with the average EPS forecast estimating a loss of $0.21 per share.
The earnings report should be an opportunity for investors to find out about how the supply chain landscape is looking at the start of fiscal 2022.
NIO’s ET7 set to roll off production lines in March
Management is likely to comment on deliveries for the year ahead at the earnings announcement. Units of its ET7 model, which aspires to rival Tesla’s [TSLA] Model S, will begin being delivered at the end of March. Deliveries for its ET5 model, unveiled at the end of the fourth quarter of 2021, are expected to begin in China in September.
Delivery growth is unlikely to have been a problem for NIO in 2021, and this should continue throughout 2022 as global demand for EVs continues to rise. However, the share price is being weighed down by regulatory pressures. Earlier in March, the company listed on the Hong Kong Stock Exchange, under the ticker 9866, in a move that it hopes will mitigate any future risk from the mainland Chinese government.
Bernstein analyst Eunice Lee reiterated a ‘market perform’ rating along with a target of $40 for the NIO share price on 10 March, implying an upside of 97.4% from its 21 March closing price. In a note to clients seen by Street Insider, she described the move to list in Hong Kong as “a relief”. Whether the current stock valuation is a buying opportunity depends on an investor’s appetite for risk, she suggested.
“The downside of a secondary listing is that the company is restricted from raising fresh capital or issuing new shares in the next six months. Also, NIO will not be eligible for trading on the Hong Kong-China Stock Connect,” Lee wrote.
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