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Nio falls on outlook, but Valuation upside remains attractive

Nio falls on outlook, but Valuation upside remains attractive

Published - June 13, 2022 @ 12:20 PM (EET)

Last week, Chinese electric vehicle maker Nio (NYSE:NIO) reported disappointing first-quarter results, having lost $281.2 million, broader than the $68.8 million it lost a year ago.

As investors digested the decline in gross margin, dropping to 14.6% sequentially compared to 17.2% in the fourth quarter of 2021, Nio's shares were down 9% in early trading Thursday before recovering slightly. 

Though Nio issued a disappointing deliveries forecast, vehicle sales continue to rise, having delivered 25,768 vehicles in the quarter, compared to the 20,060 cars in the same quarter a year ago.

JP Morgan analysts said Nio's guidance for second-quarter deliveries of 23,000 and 25,000 vehicles wasn't a surprise given the Covid-related lockdowns in China and being heavily dependent on its domestic Chinese market.


Investors will be excited to hear that Nio confirmed its new factory has begun pre-production builds of the upcoming ET5 sedan and its plans to launch a new upscale, five-passenger SUV, the ES7, later this month. 

In addition, Chairman William Li told analysts it plans to start producing an 800-volt battery pack in the second half of 2024, a good indicator that Nio continues to explore additional revenue opportunities.

"Despite the volatilities of supply chain and the challenges in vehicle delivery resulting from the recent COVID-19 resurgence, we witnessed robust remand for our complementary products and achieved an all-time high order inflow in May 2022." - CEO William Bin, Nio.

Batteries are a crucial component of an EV, and building them in-house will keep Nio on its path to becoming self-reliant and producing EVs cost-effectively and at scale.

Despite the electric vehicle maker's downbeat second-quarter outlook, its growth plans remain intact and look better than ever, while consensus among analysts is still a Strong Buy.

The average Nio price target of $41.09 implies a 112.02% upside potential to current levels.  Over the past year, shares have gained 152.3%.

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