Analysts revalue key Tesla rival after earnings
William Bin Li doesn't build rocket ships or robots, but believers consider his Nio the “Tesla of China.”
Li grew up in a rural village in China's Anhui province. The village had no electricity until he was in high school. Now, Li aims to strengthen the battery charging network across less affluent areas in China.
On August 20, 2024, Nio launched its "Power Up Counties" initiative to expand its charging and battery-swapping infrastructure to all county-level administrative divisions, providing a more convenient power solution for EV users.
Perhaps surprisingly, Nio also manufactures a high-end smartphone unveiled last September, priced between 6,499 and 7,499 yuan ($890-$1,030). The smartphone is designed to integrate with its electric vehicles, offering features such as allowing users to park their cars via the phone.
“William Li is a pioneer. He is effectively China’s Elon…if we are looking at branding, looking at bold moves,” said Tu Le, founder of Beijing-based advisory company Sino Auto Insights, the Financial Times reported.
Related: Analyst unveils bold 'Apple-esque' Tesla stock forecast
After co-founding the car comparison website Bitauto in 2000 and achieving success, Li founded Nio in 2014. He saw tremendous potential in the electric vehicle industry and chose the name Nio, which means "blue sky coming" in Chinese.
In September 2018, Nio (NIO) was listed on the New York Stock Exchange at $6.28 and a market value of more than $6 billion.
Tesla achieved its first full-year profit in 2020, 17 years after its founding in 2003. The profit came on sales of 499,550 vehicles. That year, Nio delivered 43,728 vehicles.
It’s been a decade since Nio was founded and six years since it went public, and Nio still hasn’t made a profit yet.
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Nio narrows losses, plans to enter the U.S. market
Nio’s (NIO) shares popped 14% to $4.85 after it reported a narrowed loss for the second quarter on Sept. 5. It added another 3.5% to $5.02 on Sept. 6 even as U.S. stocks slumped.
The company reported a loss of 30 cents per share on $2.4 billion in revenue for the quarter ended June 30, slightly beating analysts' expectation of a 31-cent per share loss on the same revenue, according to FactSet. Nio lost 45 cents per share on $1.2 billion in revenue a year ago.
Related: Analyst revamps Tesla, Rivian, Nio price targets on electric vehicle demand
For the third quarter, Nio forecasts revenue between $2.63 billion and $2.71 billion, with vehicle deliveries estimated between 61,000 and 63,000 units.
Both projections exceed analysts' expectations of approximately $2.5 billion in revenue and 57,000 vehicle deliveries.
Li said in the earnings release that Nio has secured over 40% of the market share in China's battery electric vehicle segment priced above RMB 300,000 ($42,314).
The company doesn't sell cars in the U.S. yet, but Nikkei Asia reported that Nio aims to enter the U.S. market by 2025.
Analysts set mixed Nio stock price targets
Nio shares have struggled in 2024, down nearly 45% on the year.
Nonetheless, Bank of America raised Nio's price target to $5.30 from $5 and kept a neutral rating after seeing largely narrowed non-GAAP net losses, in line with the firm's estimates.
The analyst also warns that, while there will be some positive effects from volume growth in 2024, the benefits will be limited by slower margin expansion and high operating expenses, according to Thefly.com.
Mizuho analyst Vijay Rakesh also kept a neutral rating on Nio while lowering his price target to $5 from $5.5.
The firm notes that Nio has projected third-quarter deliveries of 62,000 units and expects margins to improve with higher volumes. However, it also points out that the Onvo launch could present a short-term challenge as the company scales up its production of lower-cost vehicles.
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Citi lowered Nio's price target to $7 from $8.50 with a buy rating before the earnings. The analyst expects volume growth and reduced promotional incentives to boost gross margins in Q3 and Q4.
Citi thinks Nio's and its Chinese rival XPeng's (XPEV) valuation will converge and open up an arbitrage opportunity for Nio amid favorable sector and policy trends. It increased estimates for Nio but cut the price target on the shares.
Related: Veteran fund manager sees world of pain coming for stocks