Nio Stock Earnings: NIO closes up 1.7% as Moody's cuts China credit outlook


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  • Nio grew deliveries by leaps and bounds in the third quarter on rising SUV sales.
  • Job openings declined in October, while the November ISM Services PMI showed expansion.
  • Nio bests consensus on earnings but misses revenue expectations for Q3. 
  • Chinese EV maker guides for deliveries between 47K and 49K in Q4.


 

Nio (NIO) stock's initial 5.5% gain on Tuesday due to its third-quarter earnings beat faltered throughout the sesion and closed up 1.5% at $7.43. The Chinese electric vehicle (EV) manufacturer released third-quarter earnings that showed sales of higher margin SUVs surged 258% from the most recent quarter and 64% from a year ago. However, Moody's changed its China credit outlook to negative due to soaring debt levels related to the country's despressed real estate sector, which dealt a blow to Chinese stocks.

The broader market remained mixed on Tuesday as the Dow Jones and S&P 500 closed marginally lower, while the NASDAQ Composite gained 0.31%. The ISM Services PMI was released a half hour into the regular session, and it showed rising expansion in the US service sector. The survey of service sector executives rose to 52.7 in November, above the previous month's 51.8 reading.

The JOLTS Job Opening data for October additionally showed job openings falling from the previous reading of 9.35 million to 8.773 million. This is viewed as more evidence for a soft landing in the economy that should make the Federal Reserve more open to cutting rates as it can see its tight monetary policy working to soften a once tight labor market.

ADP Employment Change arrives on Wednesday, Initial Jobless Claims follow on Thursday, before November US Nonfarm Payrolls arrive on Friday.

Nio stock and earnings news

Nio beat earnings expectations but missed the average revenue forecast for the third quarter. Earnings Per Average Dilute Share or EPADS was $-0.31, five cents better than the Wall Street forecast. Revenue of $2.61 billion rose almost 47% from a year ago but missed consensus by $50 million.

“According to the retail sales data from China Automotive Technology & Research Center, NIO ranked first in the battery electric vehicle market segment priced over RMB300,000 in China, with a market share of 45% in the third quarter of 2023,” boasted CEO William Li.

Vehicle margin rose to 11% in the third quarter, better than the 6.2% seen in Q2 2023 but down from 16.4% seen in the year-ago quarter. The rise in margin was a product of much higher vehicle volumes. Nio delivered 55,432 in Q3, better than the 31,607 deliveries in Q3 2022 and the 23,520 delivered one quarter earlier. 

Nio’s electric sedan division reported deliveries that rose 104% from a year ago and 37% from Q2. Altogether, total deliveries from SUVs and sedans jumped 75% from a year ago.

Based on the fourth-quarter outlook, Nio management expects 47K to 49K in total deliveries, a rise of about 20% YoY. Revenue, however, is forecast to arrive between flat to up 4% YoY.

Price competition appears to be minimizing revenue growth one year into an EV price war launched by Tesla (TSLA). The leader of the global EV industry, albeit with heavy competition from hybrid powerhouse BYD (BYDDY) in China, Tesla is back in the news this week after a Danish union announced it would refuse to deliver the company’s vehicles via Danish ports and roads due to the company’s ongoing fight with a Swedish union. The action is called a “sympathy strike”.
 

EV stocks FAQs

What are electric vehicles?

Electric vehicles or EVs are automobiles that use rechargable batteries and electric motors to accelerate rather than internal combustion engines (ICEs). They have been around for more that 100 years, but battery technology research & development was meager for much of the 20th century. Lithium-ion battery technology became advanced enough to produce EVs at scale in the late 1990s and 2000s, and sales have been steadily increasing since then Tesla’s Roadster was unveiled in 2008. EVs are viewed as a means of reducing carbon emissions since battery electric vehicles (BEVs) themselves produce zero emissions. Other vehicles called plug-in hybrid electric vehicles (PHEVs) utilize both battery electric power and ICEs as a backup.

What is the market share held by EVs?

EVs are growing from a small base, but they rose from 9% of global new auto sales in 2021 to 14% of the total in 2022. This was a 65% YoY growth rate, and the industry delivered 10.2 million EVs worldwide in 2022. Projections show this number climbing above 16 million in 2023. Across the world, market shares differ greatly among nations. Nearly 88% of Norwegian new car sales in 2022 were EVs. On the other hand, the United States, where much of the modern innovation in EVs was forged, had less than 8% of new vehicle sales go to EVs in 2022. The largest EV market in the world, China, saw 30% of the market go to EVs that year.

Who is the father of the EV?

We know you’re thinking Elon Musk, but he’s probably more like the father of the mass-market, contemporary EV. All the way back in 1827, a Hungarian priest named Anyos Jedlik invented the electric motor and used it the following year to power a vehicle of sorts. French scientist Gaston Planté invented the lead-acid battery in 1859, and German engineer Andreas Flocken built the first true electric car for the public in 1888. EVs made up about 38% of all vehicles sold in the US around 1900. They began losing market share rapidly after 1910 when gasoline-powered vehicles grew much more affordable. They largely died off until new research programs in the 1990s led to gradual private sector investment in the 2000s.

Who are the biggest makers of electric vehicles?

China’s BYD is by far the largest manufacturer of EVs in the world. In 2022 it sold 1.8 million EVs and in the second half of the year made up 20% of the global market. The asterisk given to BYD is that the vast majority of these vehicles are hybrids. Tesla’s 12% market share is often treated as more significant than BYD, because it only sells BEVs and is the most famous EV brand in the world. Volkswagen, BMW and Wuling then round out the top five. As a new sector with heavy investment though, many startups have flooded the market. These include China’s Nio, Li Auto and Xpeng; a Swedish-Chinese manufacturer called Polestar; and Lucid and Rivian from the US.

 

Nio stock forecast

Nio stock has been slipping sideways below support at $7.30 recently after a series of lower highs. After announcing a $1.5 billion convertible bond back in September, the possibility of dilution has been scaring away would-be investors. 

The only saving grace for bulls is to take advantage of the third quarter’s fairly successful result. If bulls can push above the November 6 high at $8.51, then Nio stock may witness an influx of buyers. This would allow a rally above the $9.20 resistance level that makes the bearish impulse obsolete. 

However, NIO stock is trading beneath its 200-day Simple Moving Average (SMA), which is trending down just above the $9.20 resistance level. This means that the trend is down, and most of the market will not have confidence in NIO until the stock breaks above that SMA. Buyers beware for now.

NIO daily chart

 

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