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What to Watch for When NIO Reports Earnings

Chinese electric-vehicle maker NIO (NYSE: NIO) is set to report its third-quarter earnings before the market opens on Tuesday.

The consensus view of Wall Street analysts polled by Thomson Reuters is that NIO will report a loss of $0.17 per share on revenue of $653.73 million. That would be a significant improvement over its results in the third quarter of 2019, when it lost $0.35 per share on revenue of just $257 million.

The high points of NIO's third quarter

  • NIO delivered 12,206 vehicles in the third quarter, up 154% from the third quarter of 2019.
  • Deliveries fell month-over-month in July due to parts shortages, but more than bounced back in August and jumped again in September.
  • NIO took advantage of its surging stock price to sell 88.5 million new shares in August, raising about $1.7 billion.
  • It used about $1.1 billion of the proceeds to buy back some of the equity it gave up as part of a bailout deal earlier in the year.
  • Leveraging its network of automated battery-swap stations, NIO launched a "batteries-as-a-service" program in August. Buyers can now buy a NIO vehicle with a subscription to the battery-swap service in lieu of a battery pack. That lowers the initial price for the consumer while creating an ongoing revenue stream for NIO.
  • The battery packs are bought from NIO and leased to customers by a joint-venture company that includes NIO, battery giant Contemporary Amperex Technology Limited (often known as CATL), and two financing companies.
  • Deliveries of NIO's newest model, a sporty crossover called the EC6, began in September as planned.

NIO launched a new batteries-as-a-service program in the third quarter. Expect an update on Tuesday. Image source: NIO.

Some key questions for NIO

While listening to NIO's earnings call, auto investors should keep a sharp ear out for information on these topics.

  • Costs. Production and deliveries have ramped up quite a bit over the last several months. Have costs kept pace, or is NIO finding some leverage at these production levels?
  • Batteries-as-a-service. Is it proving popular? How profitable is it for NIO given the joint-venture arrangement?
  • Cash. The automaker came close to going broke early this year, but was revived by a bailout put together by economic-investment authorities in China's industrial Anhui province. It should be in much better shape now -- it had $1.6 billion in cash at the end of June -- but how much was left as of Sept. 30, and what does it plan to spend that cash on over the next couple of quarters?
  • More new models? The company is expected to launch a sedan (probably called the ET7) early next year. Is that on track? Are there other new models in the works?

What to expect from NIO's earnings

NIO's stock has had a dramatic run since the company's brush with bankruptcy in early 2020. Its price might be due for a pullback -- but I don't think the earnings report will be the catalyst that triggers one. I expect a loss that's slightly better than Wall Street's forecast, revenue roughly in line with the estimate, some good news on costs, and no bad surprises. We'll find out on Tuesday.

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John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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