Nio (NYSE:NIO) could be gearing up for a strong Q3 if the latest delivery numbers are anything to go by. In July, the Chinese EV maker delivered more than 20,000 vehicles for the first time, amounting to a record month.
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That is evidence of improving execution, says Deutsche Bank analyst Edison Yu, who believes that driven by a healthy order book for the recently launched new version of its SUV, the ES6, the company will guide to Q3 deliveries of more than 60,000.
Given the combination of higher sales volumes and controlled spending, Yu has raised his estimates for deliveries and gross margins. The 2023 delivery forecast is raised by 10,000 units to 180,000, amounting to a 47% year-over-year increase, while the gross margin outlook is pushed up by 40bps to 7.4%.
As for the Q2 readout (expected next month), Yu reminds investors that early in June, the company introduced a price decrease of 30,000 RMB for all its models, resulting in the entry-level model (ET5 series) now starting at slightly below 300,000 RMB. “In our view,” he said, “pricing had generally been an issue for getting incremental buyers considering premium BEVs have sold poorly this year. NIO’s pricing was the highest amongst the upstart brands and at times above BBA BEVs when accounting for dealer incentives.”
With deliveries for the quarter already announced at 23,520 units, Yu expects revenue of 9.1 billion, the same as consensus. But with margins under pressure in the quarter and the aggressive promotion of new models leading to elevated levels of SG&A (selling, general and administrative), he sees another big loss (-2.86 EPS) and cash burn, although that is “well understood by the market.”
However, it’s the promising future prospects that prompt an upward revision in Yu’s price target on NIO. The analyst has lifted his target from $13 to $17, implying potential gains of 32% over the one-year timeframe. Yu’s rating stays a Buy. (To watch Yu’s track record, click here)
In total, over the last three months, 12 analysts have chimed in with NIO reviews and these breakdown into 7 Buys and 5 Holds, all culminating in a Moderate Buy consensus rating. (See NIO stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
