Nio (NIO) investors usually have high expectations from the company dubbed the Tesla of China. Before Thursday’s post-2Q21’s results, in the prior 11 quarters, shares fell eight times following the quarter’s financial report.
Going by Thursday’s action, you can now make that 9 out of 12. Not that the results were bad. In fact, there were beats on the top-and bottom-line.
Revenue of $1.31 billion beat the estimates by $20 million and increased by 127% year-over-year, while non-GAAP EPS of -$0.03 came ahead of the Street’s call by $0.08.
Looking ahead, the company anticipates between 23,000 to 25,000 deliveries in Q3, basically maxing out capacity which currently stands at around 8,000 a month. Previously Nio expected to deliver between 21,000 and 22,000 units. Q3 revenue is expected to hit $1.44 billion, above the consensus estimate of $1.38 billion.
It’s possible the share price drop reflects the uncertainty surrounding the ongoing global chip shortages. Or maybe as J.P. Morgan’s Nick Lai believes, there are some issues to keep in mind beyond the headline numbers. Lai calls the results a “mixed bag, with margin moderately shy of expectations on a weaker mix, while management guided to higher D&A costs in the next two to three quarters.”
These near-term charges are because the company has altered its accounting policy to book D&A (depreciation and amortization) faster “in preparation” of the new NT2 platform – Nio’s second-generation autonomous driving platform.
“Nevertheless,” adds Lai, “Management indicated the company will launch three new models in 2022 (vs our previous expectation of one) on new production architecture, which drives higher profitability than the first generation of production platform; this is a positive surprise and should be welcomed by investors.”
Lai expects Nio’s sales will almost double in volume next year, projecting roughly 173,000 units in 2022 compared to 93,000 in 2021 and 44,000 the previous year.
All in all, Lai remains a Nio bull, sticking with an Overweight (i.e., Buy) rating and $70 price target. Investors stand to pocket ~70% gain should the analyst’s thesis play out. (To watch Lai’s track record, click here)
Looking at the consensus breakdown, all of Lai’s colleagues agree. NIO stock has a Strong Buy consensus rating based on Buys only – 6, in total. There’s plenty of upside projected too; the $65.17 average price target indicates share gains of 58% on the one-year time frame. (See Nio stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
