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Earnings preview: Will the new EVs lift Nio in Q4?

Even as Elon Musk continues to irk US regulators, Chinese counterpart Nio (NIO) has been raising its ante in capturing the electric vehicle market.

This is evidenced by Nio’s stock price, which has increased over 60% since the start of this year. This is in comparison to a 4% decline seen by Tesla (TSLA) during the same period. On Friday, Tesla stock tumbled over 7% after it announced its new Model 3 pricing and store closures.

Nio will report fourth-quarter results on March 5, after market close.

Image courtesy: Nio

Nio’s recent stock rally was mostly spurred by the anticipation of investors ahead of its quarterly results as well as CBS’ 60 Minutes, which likened Nio to a much bigger rival Tesla.

Nio stock had surged in the days following its September-IPO when it was priced at $6.26 to raise about $1 billion. Since its debut at the New York Stock Exchange, Nio shares are up 60%.

In the third quarter, its first as a public company, Nio significantly narrowed its losses to 10.35 Chinese yuan per share from 58.52 yuan per share in the same quarter last year, despite a ramp-up in the production of its electric SUV, the ES8, and cheaper model ES6.

Yet, Nio’s road to profitability could take some time, given the industry it operates in. Separately, the company has been making significant investments in autonomous vehicles and have been conducting road tests both in China and the US.

READ: 2018 sees a new global leader in electric vehicle consumption

These investments could add to the burden of production costs in the short term, though they send good vibes from a long-term perspective.

EV is turning out to be a highly competitive market, where predictions are becoming meaningless by day. Last month, another Chinese firm, Kandi Technologies (KNDI), made its way into the US EV market, after getting approval from the National Highway Traffic Safety Administration (NHTSA).

NIO stock has a 12-month average price target of $8.60, suggesting a 13.5% downside from the last close.

 

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Tags: auto stocks
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