NIO (NYSE:NIO) stock was resigned to the status of an underdog for much of the past two years. The frequent steep retreats that invariably occurred without any rhyme or reason frustrated the uber-loyal NIO investors to no end. It’s an altogether different story that most staunch supporters still chose to stand by it.
NIO stock has picked up some momentum since bottoming at a little over $13 on March 15. Does that mean that it has gained escape velocity to break free of the negative undercurrent of selling and more selling?
The upcoming earnings report, for sure, is a key catalyst NIO investors are looking ahead to. The report in itself may not determine the near-term trajectory of the stock. Several dynamics, both external and internal, that are in play have a bearing on NIO’s fundamental performance. And by extension, the stock’s performance.
What Its Q4 Report Promises For NIO Stock Investors
NIO is scheduled to release its fourth-quarter earnings report after the market closes on Thursday. The company hasn’t been consistent in the past with its earnings release timings per se. An earnings call will follow at 9:00 pm ET on the same day.
The average analysts’ estimates suggest the company is on track to report a wider loss of twenty-one cents and revenue growth of roughly 49% to $1.53 billion.
NIO’s Historical Revenue & Bottom Line vis-à-vis Consensus
The company has managed to beat consensus revenue estimate in each of the past four quarters. Meanwhile, the bottom-line surpassed expectations in all but one quarter. Over the past 30 days, the consensus loss per share estimate held steady at twenty-one cents. Although it had narrowed from the twenty-five cents around 90 days ago.
A Beat on Topline Looks a Given
NIO announced in January its delivered 25,034 vehicles in the fourth quarter of 2021. The company’s blended average selling price (ASP) in the third quarter of the year was $54,847 (based on vehicle revenues and deliveries for the quarter). NIO has not added any new products to its lineup. Assuming the product mix and pricing remained the same, vehicle revenues for the fourth quarter could come in around $1.37 billion.
Other sales accounted for roughly 12% of the total revenue in the third quarter and it spiked about 351% year-over-year (YoY). This head comprises revenue from regulatory credits and battery upgrade service, among other things.
Assuming other sales contributes the same proportion to overall revenue, NIO could easily beat the consensus expectation.
As far as the bottom line is concerned, vehicle margin remains the dark horse. Raw materials and components were in short supply even before the current crunch was exacerbated by the Russia-Ukraine war. Input cost inflation, therefore, cannot be ruled out. It remains to be seen how much this has hurt vehicle margins.
NIO’s Vehicle Margin Over Past Four Quarters
What to Look For on Earnings Call
When NIO’s C-suite addresses analysts, media and investors post earnings, the focus will be on the deliveries and revenue outlook for the first quarter of 2022. NIO has delivered a cumulative 15,783 vehicles for the January to February period.
February is historically a soft month for vehicle sales in China, and despite the seasonality, NIO delivered 6,131 vehicles during the month.
More than the financials and performance metrics, investors will likely focus on management commentary about supply chain and production. NIO has thus far abstained from raising prices of its vehicles despite most domestic peers and Tesla (NASDAQ:TSLA) opting for price hikes to absorb spiraling raw material prices.
Local Chinese media have quoted NIO executives as stating price hikes are not imminent. It remains to be seen how far NIO can hold off on this front.
Investors may also keen to find out whether the lockdowns in some parts of China have upset the company’s production plans.
Chairman and CEO William Li could also be probed on the company’s recent secondary listing in Hong Kong. As well about the looming delisting threat in the U.S.
2022 promises to be a product launch-heavy year, so investors will want to know if the timelines are all on track. The company is widely expected to begin deliveries of its high-end ET7 sedan later this month. Apart from the ET7, NIO has in its pipeline at least two more products due to be launched this year. These include a midsize ET5 sedan and a new all-electric SUV named ES7.
NIO could also detail its international expansion plans and the progress in Norway, which happens to be the company’s first stop overseas.
How Nio Stock Has Reacted to Past Earnings
If recent history is anything to go by, NIO stock has mostly traded down in the first session following the earnings date as well as a week after earnings.
In all likelihood, the stock could move around the recent range, unless there are some serious issues with key metrics.
Bottom Line on NIO Stock
NIO stock investors should brace for a gradual recovery through the year, rather than avariciously hoping for a big near-term spike. They can rest assured that their bets are on a fundamentally sound company. NIO has leeway for an extended period of strong growth. It only requires execution and mitigation of external risks for NIO to position itself on the superhighway of growth promised by the lucrative EV market.
NIO’s valuation is quite attractive, with the stock trading at a price/sales (P/S) ratio of 6.56. This is less than the median of 7.05 for the company and far less the historical high of 33.15. Domestic peer XPeng (NASDAQ:XPEV) is pricier with a P/S ratio of 9.68 and market leader Tesla’s P/S ratio is at 16.68. Some of the U.S. electric vehicle startups such as Lucid (NASDAQ:LCID) and Rivian (NASDAQ:RIVN) are trading at ridiculous valuations of 652.94 and 27,540 times, respectively, their sales.
On the date of publication, Shanthi Rexaline 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.
