NIO Q3 preview: Where next for the NIO share price?

There are no problems with demand for NIO’s electric cars, but keeping up supply and maintaining profitability are becoming bigger problems. We explain what to expect and consider how NIO shares could react.

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When will NIO release Q3 earnings?

NIO will release third quarter earnings after US markets close on Tuesday November 9.

 

NIO Q3 earnings preview: what to expect from the results

NIO delivered 24,439 electric vehicles during the third quarter, double what it shifted the year before and 12% higher than in the second quarter. For NIO, like its peers, the challenge is not drumming up demand but ensuring it has the supply needed to meet record order numbers.

With September deliveries having hit a new monthly record of 10,628 cars, there were signs that NIO was capable of ramping-up output to help meet increasing demand. But the problems facing the industry became more evident in October, when NIO shipped just 3,667 cars. That was due to industry-wide problems like the pressure being applied to supply chains and company-specific issues including upgrades to production lines and an overhaul of its factories ahead of plans to launch three new models next year based on a new generation of technology.

With record deliveries booked in the third quarter, the focus will be on profitability. Investors will want to see how the tight supply chain, rising raw material costs and higher commodity prices has weighed on automotive margins. Figures from Bloomberg suggest this could fall to below 18% in the third quarter from 20.3% in the second. NIO’s margin is still significantly higher than the majority of automakers and is closer to the superior profitability boasted by Tesla, but investors nonetheless want the firm to maintain this position even if it does provide more flexibility in the current climate.

Profitability is likely to remain the key focus over coming quarters too, particularly as spending continues to ramp-up as it tinkers with its plants, ups R&D investment, continues to build-out its store network in China, and prepares to launch its new models. Meanwhile, the poor delivery numbers in October set an uncertain stage for the fourth quarter and means NIO will have to make serious headway in November and December to make up for the disappointment.

Wall Street is expecting third quarter revenue to rise to a new record of RMB9,316.0 million, up from RMB4,526 million the year before and advancing from the RMB8,448 million booked in the second quarter.

The net loss attributable to shareholders is forecast to come in at RMB726.4 million, shrinking from the RMB1,188 billion loss last year but widening from the RMB659.3 million loss booked in the latest quarter.

NIO shares have soared over 1,000% since the start of the pandemic in February 2020 but have plunged over 30% from the all-time highs seen in January 2021. Brokers are bullish on NIO’s prospects. The 25 brokers covering the stock currently have a Buy rating on NIO and an average target price of $58.30, implying there is over 34% potential upside from the current share price.

 

Where next for the NIO share price?

NIO is extending a rebound from $33.00, retaking its 50 and 200 sma. The RSI is also supportive of further gains whilst it remains out of overbought territory. 

However, the dominant longer-term trend since the beginning of the year is bearish. Buyers would need to move above the 2021 descending trendline at $46.50 and break above $47.15 in order to negate the longer term down trend.  A move above $55 could change the longer-term trend to bullish. 

On the downside, a move below the 50 sma and November low of $37 could negate the near-term uptrend and bring $33 into target.  

Where next for the NIO share price?

 

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