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NIO's Q2 Results Impress: Should Investors Buy the Stock Now?
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Shares of China EV company NIO Inc. (NIO - Free Report) rallied more than 14% on Thursday after the company delivered strong second-quarter 2024 results. The gain continued on Friday, with the stock up another 3.5%. Robust vehicle deliveries, continued improvement in vehicle margins and an upbeat outlook are likely to have fueled investors’ optimism.
The company achieved a quarterly record in deliveries with 57,373 units, up 144% year over year. Most importantly, amid volume ramp-up and cost optimization of components and supply chain, vehicle margins witnessed an upward trend. After the metric grew to 9.2% (up 4.1 percentage points year over year) in the first quarter of 2024, second-quarter vehicle margins came in at 12.2%. Encouragingly, NIO targets a vehicle margin of around 15% by the end of 2024.
For the third quarter of 2024, NIO expects deliveries in the band of 61,000-63,000 units, indicating year-over-year growth of roughly 12% at the midpoint of the guided range. While the growth rate is not likely to be as great as the second quarter, it is still quite decent. Also, revenues in the third quarter are forecast to be up 0.2-3.2% year over year to $2,630-$2,707 million.
Lest we forget, NIO’s market capitalization hit $100 billion in early 2021, as much as U.S. legacy automakers General Motors (GM - Free Report) and Ford (F - Free Report) combined. Fast forward to the present, it has lost 90% of its value. Year to date, the stock has plunged close to 45%. Is this a buying opportunity? Given the company’s vehicle delivery growth, narrowing loss and improving vehicle margins, as well as its ambitious plans at the Power Up 2024 event, should investors consider investing in the stock now?
NIO Targets Mainstream Market with ONVO
NIO’s robust product portfolio, featuring models such as the ES6, ET5T, ES8, EC6, EL7, ET5, ET7 and EC7 are driving deliveries. But given the high price point of these EVs, NIO has made a smart move by expanding beyond its luxury lineup with the launch of a more affordable ONVO brand in May 2024.
L60, ONVO’s first product, is set to commence deliveries late this month. By year-end, NIO aims to have over more than 200 ONVO stores (with 105 already opened), with most deliveries happening in the fourth quarter. It hopes to deliver around 10,000 units in December and increase capacity to 20,000 units per month in 2025. Positioned $4,000 cheaper than EV giant Tesla’s (TSLA - Free Report) Model Y in China (which starts at around $34,000 in China), L60 is expected to challenge Tesla's market share. NIO is confident that the ONVO brand will drive future growth.
NIO Powers Up With AI and Charging Breakthroughs
At NIO IN 2024, the company showcased significant AI advancements, including its in-house developed SkyOS vehicle operating system and Banyan 3 smart system. The company also introduced its new intelligent driving chip, Shenji NX9031, and the NIO World Model (NWM) architecture for smart driving. It launched NAD Arch 2.0, the most advanced autonomous driving architecture based on NWM.
At the Power Up 2024 event, NIO revealed its extensive through the “Power Up Counties” initiative, aiming to install battery swap stations across 2,300 counties in China by 2025 end. NIO currently has more than 2,561 swap stations and has installed over 23,000 power and destination chargers. Additionally, NIO is constructing a new manufacturing facility in Wuhan, targeting 1,000 battery swap stations annually. Its “Power Up Partner Plan” invites collaboration for building and sharing charging stations.
These initiatives are set to strengthen NIO’s standing in smart driving and sustainable mobility.
Are Analysts Growing Optimistic About NIO?
In the past seven days, the Zacks Consensus Estimate for NIO’s 2024 and 2025 loss per share has narrowed by 2 cents and 1 cent, respectively.
Brokerages like Jefferies and Citi Research are confident about NIO’s rebound and project strong sales growth in the coming quarters.
The consensus mark for 2024 and 2025 top and bottom lines suggests year-over-year improvement.
Image Source: Zacks Investment Research
Is NIO Stock Attractively Valued?
The company’s price-to-sales (P/S) ratio, currently at 0.65, is well below its 5-year high and median values. However, it is still above the industry’s 0.56, suggesting the stock is not entirely undervalued. Discouragingly, NIO currently has a Value Score of F.
Image Source: Zacks Investment Research
How to Play NIO Now?
NIO’s efforts to improve margins, launch the more affordable ONVO brand and accelerate AI innovation are commendable. However, China’s struggling economy poses risks. The country is grappling with a property crisis, sluggish consumer confidence and weak market optimism, which may lead consumers to favor ONVO's lower-priced offerings over NIO’s luxury vehicles. Additionally, the company’s declining cash position — from $4.6 billion in December 2023 to $3.4 billion in June 2024 — raises concerns about potential fundraising and shareholder dilution.
Existing shareholders should hold their positions, but new investors should remain cautious given these headwinds. With profitability unlikely before 2027 and current valuations not particularly attractive, waiting for a better entry point might be prudent to fully capitalize on NIO’s long-term growth potential.
Image: Bigstock
NIO's Q2 Results Impress: Should Investors Buy the Stock Now?
Shares of China EV company NIO Inc. (NIO - Free Report) rallied more than 14% on Thursday after the company delivered strong second-quarter 2024 results. The gain continued on Friday, with the stock up another 3.5%. Robust vehicle deliveries, continued improvement in vehicle margins and an upbeat outlook are likely to have fueled investors’ optimism.
NIO Puts Up a Stellar Q2 Show
NIO posted better-than-expected top and bottom-line numbers. Also, the loss per ADR narrowed to 34 cents from 51 cents incurred in the year-ago quarter. Revenues increased 98% to $2.4 billion.
The company achieved a quarterly record in deliveries with 57,373 units, up 144% year over year. Most importantly, amid volume ramp-up and cost optimization of components and supply chain, vehicle margins witnessed an upward trend. After the metric grew to 9.2% (up 4.1 percentage points year over year) in the first quarter of 2024, second-quarter vehicle margins came in at 12.2%. Encouragingly, NIO targets a vehicle margin of around 15% by the end of 2024.
For the third quarter of 2024, NIO expects deliveries in the band of 61,000-63,000 units, indicating year-over-year growth of roughly 12% at the midpoint of the guided range. While the growth rate is not likely to be as great as the second quarter, it is still quite decent. Also, revenues in the third quarter are forecast to be up 0.2-3.2% year over year to $2,630-$2,707 million.
NIO Inc. Price, Consensus and EPS Surprise
NIO Inc. price-consensus-eps-surprise-chart | NIO Inc. Quote
Lest we forget, NIO’s market capitalization hit $100 billion in early 2021, as much as U.S. legacy automakers General Motors (GM - Free Report) and Ford (F - Free Report) combined. Fast forward to the present, it has lost 90% of its value. Year to date, the stock has plunged close to 45%. Is this a buying opportunity? Given the company’s vehicle delivery growth, narrowing loss and improving vehicle margins, as well as its ambitious plans at the Power Up 2024 event, should investors consider investing in the stock now?
NIO Targets Mainstream Market with ONVO
NIO’s robust product portfolio, featuring models such as the ES6, ET5T, ES8, EC6, EL7, ET5, ET7 and EC7 are driving deliveries. But given the high price point of these EVs, NIO has made a smart move by expanding beyond its luxury lineup with the launch of a more affordable ONVO brand in May 2024.
L60, ONVO’s first product, is set to commence deliveries late this month. By year-end, NIO aims to have over more than 200 ONVO stores (with 105 already opened), with most deliveries happening in the fourth quarter. It hopes to deliver around 10,000 units in December and increase capacity to 20,000 units per month in 2025. Positioned $4,000 cheaper than EV giant Tesla’s (TSLA - Free Report) Model Y in China (which starts at around $34,000 in China), L60 is expected to challenge Tesla's market share. NIO is confident that the ONVO brand will drive future growth.
NIO Powers Up With AI and Charging Breakthroughs
At NIO IN 2024, the company showcased significant AI advancements, including its in-house developed SkyOS vehicle operating system and Banyan 3 smart system. The company also introduced its new intelligent driving chip, Shenji NX9031, and the NIO World Model (NWM) architecture for smart driving. It launched NAD Arch 2.0, the most advanced autonomous driving architecture based on NWM.
At the Power Up 2024 event, NIO revealed its extensive through the “Power Up Counties” initiative, aiming to install battery swap stations across 2,300 counties in China by 2025 end. NIO currently has more than 2,561 swap stations and has installed over 23,000 power and destination chargers. Additionally, NIO is constructing a new manufacturing facility in Wuhan, targeting 1,000 battery swap stations annually. Its “Power Up Partner Plan” invites collaboration for building and sharing charging stations.
These initiatives are set to strengthen NIO’s standing in smart driving and sustainable mobility.
Are Analysts Growing Optimistic About NIO?
In the past seven days, the Zacks Consensus Estimate for NIO’s 2024 and 2025 loss per share has narrowed by 2 cents and 1 cent, respectively.
Brokerages like Jefferies and Citi Research are confident about NIO’s rebound and project strong sales growth in the coming quarters.
The consensus mark for 2024 and 2025 top and bottom lines suggests year-over-year improvement.
Is NIO Stock Attractively Valued?
The company’s price-to-sales (P/S) ratio, currently at 0.65, is well below its 5-year high and median values. However, it is still above the industry’s 0.56, suggesting the stock is not entirely undervalued. Discouragingly, NIO currently has a Value Score of F.
Image Source: Zacks Investment Research
How to Play NIO Now?
NIO’s efforts to improve margins, launch the more affordable ONVO brand and accelerate AI innovation are commendable. However, China’s struggling economy poses risks. The country is grappling with a property crisis, sluggish consumer confidence and weak market optimism, which may lead consumers to favor ONVO's lower-priced offerings over NIO’s luxury vehicles. Additionally, the company’s declining cash position — from $4.6 billion in December 2023 to $3.4 billion in June 2024 — raises concerns about potential fundraising and shareholder dilution.
Existing shareholders should hold their positions, but new investors should remain cautious given these headwinds. With profitability unlikely before 2027 and current valuations not particularly attractive, waiting for a better entry point might be prudent to fully capitalize on NIO’s long-term growth potential.
NIO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.