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Nio Rising 8% On Record-High Quarterly Deliveries; But Street Cautious

support@smarteranalyst.com (Ben Mahaney)

China’s electric vehicle maker Nio Inc (NIO) has revealed that it delivered 10,331 vehicles in the second quarter of 2020, surging 190% from 3,553 vehicles in the second quarter of 2019, and 3,838 vehicles in the first quarter of 2020.

Shares are now rising 8% in Tuesday’s pre-market trading.

The deliveries consisted of 8,068 ES6s, the company’s 5-seater high-performance premium smart electric SUV, and 2,263 ES8s, its 7-seater high-performance premium smart electric SUV and its 6-seater variant.

As of July 31, 2020, cumulative deliveries of the ES8 and the ES6 reached 49,615 vehicles, of which 17,702 were delivered in 2020, NIO said.

“We… expect to deliver 11,000 to 11,500 vehicles in the third quarter as the momentum continues,” said William Bin Li, CEO of NIO. “The current constraints on the productions will be lifted in the near future and we are confident that our production capacity can meet the accelerated demand of our models.”

Meanwhile total revenue surged 146.5% Y/Y and 171.1% Q/Q while vehicle sales rose 146.5% Y/Y and 177.6% Q/Q. Gross margin came in at 8.4% vs. -33.4% a year ago with vehicle margin of 9.7% vs. -24.1% year ago and -7.4% in Q1.

The company’s Q2 GAAP EPS of -$0.16 beat Street estimates by $0.10, with non-GAAP EPS of -RMB1.08 beating by RMB0.78 and revenue of $526.4M topping consensus forecasts by $24.46M.

“With the strong deliveries in the second quarter 2020, our vehicle margin significantly exceeded our target of over 5%, attributed to the increasing scale, higher average revenue per vehicle, reduced material costs and improved manufacturing efficiency,” added Wei Feng, NIO’s CFO.

For the third quarter of 2020, NIO now expects an increase of vehicle deliveries of 6.5% to 11.3% from the second quarter of 2020. It is also guiding for total revenues of RMB4,047.5 million to RMB4,212.3 million, up 8.8% to 13.3% from Q2. (See Nio stock analysis on TipRanks).

However with shares up over 250% year-to-date, the stock scores a cautious Hold consensus from the Street. Most worryingly the average analyst price target indicates that significant downside potential lies ahead.

Goldman Sachs analyst Fei Fang last month cut Nio’s rating to Sell from Hold on valuation following the rally in recent weeks. He maintained his price target at $7. “The current share price reflects over-optimism given no substantial changes to volume/profit expectations,” Fang wrote in a note to investors.

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