Q1 Earnings Show Long-Term Promise for Nio Stock

It’s fair to say that investors weren’t blown away by Nio’s (NYSE:NIO) first-quarter earnings released April 29. Nio stock dipped by more than 3% immediately after the earnings report as some nervous shareholders ran for cover.

A close-up shot of the Nio (NIO) ES8 vehicle.

Source: xiaorui / Shutterstock.com

Is it really that bad, though?

True, Nio continues to post improved delivery numbers and its revenue numbers for the quarter were better than analysts had anticipated. But Nio also posted an earnings loss that was four times greater than analysts had anticipated.

Nio has already announced that its production in the second quarter will be slowed by the global shortage of semiconductor chips. That may keep Nio prices depressed for the next several weeks.

But if you are a strong believer in the growth of electric vehicles and recognize Nio’s advantage in its home market of China, Nio stock remains a compelling story for investors with a long-term horizon.

A Look at the Earnings Report

Nio posted revenue of $1.21 billion in the first quarter, which was an increase of 481.8% from the same quarter a year ago. The company has an impressive growth curve.

Profits were $237.8 million, which is also a dramatic improvement considering the company posted a loss in the first quarter a year ago. Nio says its profit jumped by 36.2% from the fourth quarter of 2020.

However, the company still posted a net loss from operations of $68.8 million, or a loss of 48 cents per share.

Quarterly vehicle deliveries topped the 20,000 mark for the first time, reaching 20,060 on the quarter. A year ago, Nio produced just 3,838 vehicles. In the fourth quarter of 2020, it produced 17,353 vehicles.

CFO Steven Wei Feng called it a great quarter:

“We have achieved another great quarter with strong financial performance in the first quarter of 2021. Mainly driven by higher deliveries and solid average selling price, our vehicle margin reached 21.2% in the first quarter. Moreover, we continued to achieve positive cash flow from operating activities for the first quarter of 2021 … Going forward, we will continue to invest in new products and core technologies, as well as in our service and power network expansion, particularly battery swapping and charging facilities.”

Nio says it expects to deliver 21,000 to 22,000 vehicles in the second quarter, despite the semiconductor shortage. That would be an increase of as much as 113% from Q1 deliveries.

Revenues for the second quarter are projected to be between $1.24 billion and $1.29 billion.

Other Lines of Business

A sometimes overlooked part of Nio is its sales of items that aren’t electric vehicles. It also offers charging stations, internet connection services for vehicles, and warranties. Nio provides energy packages that includes battery swapping and charging. Its service packages include repairs, maintenance and an enhanced data package.

Nio says revenue from these lines of business increased by 395.3% from a year ago to $88 million. That also represents a 23.4% increase from the fourth quarter of 2020.

The Outlook for NIO Stock

I really like Nio as a long-term growth pick. Remember, 47% of all electric vehicles purchased in the last 10 years were from China.

Bloomberg projects that global electric vehicle sales will jump from 1.7 million in 2020 to 26 million in 2030. Deloitte’s projection is even higher, estimating that EV sales in 2030 will top 31 million.

Nio’s advantage is that it has the government of China in its corner. Beijing invested more than $1 billion in 2019 to get the company started. And Nio has an important partnership with Anhui Jianghuai Automobile Group, which is a state-owned auto manufacturer.

Nio’s close relationship with the Chinese government will be enough of a competitive advantage to stave off competition from U.S.-based automotive companies. Look for it to seize an oversized share of the Chinese EV market.

The Bottom Line

NIO stock is down by 20% so far this year. If you want a quick turnaround on your investment, Nio isn’t for you. But if you have a long investment horizon, Nio shares are extremely appealing at this price point.

On the date of publication, Louis Navellier and the InvestorPlace Research Staff member primarily responsible for this article held long positions in NIO.

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