People are willing to buy all kinds of ridiculous cryptocurrencies that provide zero proof of concept. Nio, on the other hand, has done nothing but deliver the goods, yet its share price is down 50% over the past year.
How weird is this world we live in?
It’s not the deliveries that are worrying investors., but the automaker’s pathway to profitability. However, it certainly is moving closer to that point each quarter.
Typically house sellers have a minimum price in mind when they put their homes on the market.
Similarly, many investors probably have an idea of the number of vehicles that Nio has to deliver to get them to start buying its shares again.
Later on, I’ll try to estimate what that number is for most investors.
NIO Stock Is Worth More
As I said at the beginning of the column, Nio was trading above $60 in mid-January 2020. Today it’s trading below $30, near its lowest level since October 2020. Its market capitalization of $48.5 billion is just 9.4 times its sales.
In 2020, Nio’s price-sales multiples were much higher.
Now let’s consider the company’s deliveries and losses.
In Q3, Nio delivered 24,439 vehicles. Its loss, excluding certain items, was 726.3 million Chinese Yuan ($114.3 million). That’s a loss of $4,677 per delivered vehicle.
In Q2, it delivered 21,896 vehicles and had an adjusted loss of 511.9 million Chinese Yuan ($80.6 million), which worked out to a loss of $3,681 per delivered vehicle.
Before concluding that Nio is moving in the wrong direction, however, we ought to at least look at its metrics during the same periods in 2020.
In Q3 of 2020, it delivered 12,206 vehicles and reported an adjusted loss of 896.7 million Chinese Yuan ($141.3 million), which came to $11,576 per delivered vehicle.
In Q2 of 2020, it delivered 10,331 vehicles and had an adjusted loss of 1.13 billion Chinese Yuan ($177.9 million), which was $17,220 per delivered vehicle.
Do You See the Pattern?
While Nio’s adjusted loss per vehicle increased in Q3 versus Q2, the more important statistic is that the adjusted loss per vehicle improve by 60% YOY in Q3 and by 79% YOY in Q2.
Investors should pay attention to Nio’s Q4 loss per vehicle delivered . That information will be made available when the automaker reports its Q4 results in early March.
We already know that Nio’s Q4 deliveries climbed 44% YOY to 25,034 vehicles . The adjusted loss per delivered vehicle that quarter was $7,906, as its quarterly adjusted loss came in at 871.2 million Chinese Yuan ($137.1 million) and it delivered 17,353 vehicles.
Assuming that Nio’s adjusted loss per delivered vehicle improved by 50% in Q4, the company’s Q4 adjusted loss was probably around $99 million.
If my Q4 estimates prove to be correct, its 2021 adjusted loss was $349.7 million or $3,825 per delivered vehicle .
Nio’s vehicle deliveries have risen for seven consecutive quarters, compared to the previous quarters. It’s true that the growth rate of its EV deliveries has slowed , coming in at 2.4% in Q4, 11.6% in Q3, 9.2% in Q2, and 15.6% in Q1. But as long as its deliveries continue to climb and there are no widespread lockdowns in China, I think that its adjusted loss will fall by 50% in 2022.
The Bottom Line
Nio’s competition is heating up by the day. However, it’s far easier to sell electric vehicles than it was a year or two ago. I believe that this rising tide will lift all boats.
Nio might have to spend more on advertising to stand out in the crowd, but positive word of mouth and reviews will ultimately lift its sales.
As for how many vehicles it will have to deliver to satisfy investors in 2022, my guess is around 30,000 EVs in a single quarter.
In any event, in 12-24 months, anyone who doesn’t buy NIO stock under $30 now will be kicking themselves.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.