Nio Inc (NIO)

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Bear of the Day: NIO (NIO)
By: Zacks Investment Research | April 21, 2023

NIO (NIO) is a Zacks Rank #5 (Strong Sell) that designs, develops, manufactures, and sells smart electric vehicles in China.

The stock had a big run back in 2020, but NIO has since lost all gains since the EV bull run started. Investors are at a loss as earnings continue to underperform and analysts’ lower estimates.

About the Company

The Shanghai based company was founded in 2014 and is considered the Tesla of China. NIO offers five, six, and seven-seater electric SUVs, as well as smart electric sedans. The company also is also involved in the provision of energy and service packages to its users.

NIO isvalued at $14.7 Billion and holds Zacks Style Scores of “F” in Growth, “D” in Value, but “B” in Momentum. The stock pays no dividend.

Q4 Earnings

NIO released Q4 earnings in early March seeing EPS at -$0.44 vs the -$0.16 expected. While sales were up to $2.33B from the $1.55B last year, the EPS missed brought selling into the stock.

The big issue was a contraction in margins that came in at 3.9%, down from the 17.2% the year prior. NIO blamed the contraction to accelerated depreciation, and losses on purchase commitments for the existing ES8, ES6 and EC6 amid the transition to new models under the NIO Technology Platform 2.0.

Estimates

Since earnings, analysis have been cutting their numbers aggressively for the current year. Over the last 90 days, we have seen numbers fall from -$0.51 top -$1.36.

Looking at next year, things don’t get much better. 90 days ago, estimates were expected to come in at a gain of 6 cents. But now, a loss of 47 cents is expected.

Considering the Tesla earnings report coming up short, investors might want to take extreme caution as we head into NIO earnings.

Technical Take

In early 2020, NIO was just a $3 stock that had a dream. When EV got hot, this dream was realized as the stock ran all the way to $66. From there, the stock became very volatile in 2021 and started to bleed lower in 2022.

The collapse continues as the stock recently hit lows not seen since July of 2022.

For those interested in moving averages, the 50-day is at $9.40 and the 200-day is at $13.50. These will likely become areas of resistance if the stock manages to rally.

Summary

NIO was a former EV highflyer that continues to bleed lower. The estimates are showing no relief coming anytime soon, so investors should shy away from the name.

For those interested in the sector, a better option might be Byd (BYDDY). The stock is a Zacks Rank #1 (Strong Buy), and is trading up 15% on the year.

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