Nio Stock Is a Buy Ahead of Today’s Earnings Report

Chinese EV giant Nio (NYSE:NIO) recently reported its blowout January deliveries report, which set a new monthly record at 7,225 vehicles. Despite its stellar report, NIO stock is down 24% for the month, presenting an excellent buying opportunity.

NIO Stock

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The company kicked off the year in fine form after the effects of the global pandemic marred 2020’s first-half. The results are a testament to its brand power and its ability to cultivate an unmatched experience for its customers.

NIO’s growth has slowed considerably in the past three months. The drop could be linked to the Chinese government crackdown on Alibaba (NYSE:BABA) and the de-listing of three Chinese telecom giants from the U.S. stock exchanges.

However, most of these concerns are overblown and do not track with an EV company such as Nio. Mean targets for the stock are roughly 21% higher than the NIO stock’s current valuation. Therefore, the stock is trading at a hefty discount at this time, which is a buyable dip you shouldn’t overlook.

Incredible January Deliveries Report

Nio could not have asked for a better start to the year, posting record monthly deliveries for January. Deliveries shot up 352.1% year-over-year to 7,225 vehicles for the month. January deliveries are already more than what it achieved from January through April last year. Total deliveries for the company are now at 82,866.

Total sales for deliveries for the month and the cumulative figure for Nio exceed its rival EV company XPeng (NYSE:XPEV). XPeng’s delivery numbers for January were at 6,015 vehicles, representing a massive 470% increase on a year-over-year basis.

Moreover, total deliveries over the company’s lifetime are at just 18,772. However, with the continual innovation and ramp-up of delivery capabilities, its growth rate could continue to rise over time.

Initial estimates for Nio’s deliveries for the year were at 90,000. However, with the blowout January report, it appears that it should breeze past that number with relative ease.

Nio revealed some exciting developments at its annual NIO Day, which will continue to sustain its lofty growth rates. Some of these developments include its autonomous capabilities, which are expected to have a 1,000km range on a 150kWh battery.

Additionally, the power swap stations will facilitate the development of the battery as a service concept. Therefore, I won’t be surprised if deliveries are up to 115,000 vehicles, tripling from its 2020 levels.

Earnings Preview

Nio is expected to report its fourth-quarter and full-year 2020 results after today’s close.  The past few quarters have been nothing short of spectacular, with triple-digit growth in revenues. It has comfortably surpassed analyst estimates for the past three quarters and should do the same in this quarter.

Its revenues were up 146.1% to $690.2 million in the third quarter, with its loss per share at roughly 15 cents. Vehicle margins rose substantially, and its cash balance more than doubled. Though earnings remain elusive, its losses are narrowing with every quarter.

Estimates for the fourth quarter are looking fantastic so far, with analysts expecting a narrower loss per share with strong revenues.

The fourth-quarter loss per share is expected to be at roughly 6 cents per share on revenues of $1.04 billion. In the same period last year, it reported a loss per share of 39 cents on revenues of roughly $407 million.

Nio has previously guided its fourth-quarter revenues to fall in the $921.8 million-$947.9 million ballpark. It appears that it should breeze past that number when the report comes out.

Bottomline on NIO Stock

NIO stock’s recent sell-off is unfair, to say the least. The company continues to impress with strong delivery numbers and its exciting product pipeline.

Fourth-quarter results should comfortably beat analyst estimates and set the stage up for a blowout, first-quarter report for this year. The recent drop in the stock’s price is an excellent opportunity to scoop it up at a considerable discount.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.


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