By Nio (NIO) stock price has bounced back in the past few days even as other Chinese EV companies slumped to their lowest levels this year. It rose to $4.25 on Wednesday, 17% higher than the lowest point in August.
Still, Nio remains sharply lower than its all-time high. It has dropped by over 93% from its highest point in January 2021. This plunge has brought its market cap from over $85 billion to $7.84 billion.
Chinese EV companies’ earnings
Many Chinese EVs have published their financial results in the past few months. Li Auto stock dropped by almost 20% on August 27 after the company’s results revealed that its growth was slowing. Its results were notable because Li is often seen as one of the best EV brands in China. For example, its stock jumped to $46.36 earlier this year as most EVs were slumping.
Xpeng also released mixed results that showed that its revenue rose by 60% to $1.12 billion. While the top-line growth was encouraging, its margin figures were relatively weaker than expected. Xpeng is now pegging its future to Mona, a recently launched vehicle that has seen robust sales.
BYD, the biggest Chinese EV company, reported strong results but warned that its outlook was challenging.
A key theme in these results is that the companies are still selling more vehicles but often at a discount, which is affecting their margins. Also, there are signs that BYD’s dominance in the industry is hurting smaller companies.
Nio earnings ahead
The next important catalyst for the Nio stock price will be its financial results scheduled for Thursday. These numbers will provide more color on whether the company is facing the challenges facing other firms.
In June, Nio said that its vehicle deliveries stood at over 30,000 in the first quarter, a small dip from the 31k it delivered in the same period in 2023.
Nio’s revenue came in at $1.16 billion, a drop of 9.1% from the same quarter in 2023. On a positive side, the company grew its vehicle margin to 9.2% from 5.1%. The margin was, nonetheless, lower than the 11.9% it made in the previous quarter.
Nio’s results are expected to show that its revenue came in at $2.4 billion, a 93% increase from the same period last year. Its earnings per share is also expected to come in at 31 cents, down from 46 cents a year earlier. Nio, has missed analysts’ estimates in the last four consecutive quarters.
Nio’s explosive growth will be because of the sharp increase in its vehicle deliveries in the past few month. It delivered 15,620 vehicles in April, 20,544 in May, and 21,000 in June, bringing the total quarterly deliveries to 57,373, a 150% YoY increase.
Concerns about Nio remains
The main concerns among investors are its margins and its forward guidance. With competition rising, most companies have been forced to slash prices. Nio did that in 2023 and there are rumours that it is offering substantial discounts in China.
Nio hopes that its Onvo brand will help to sustain its growth trajectory. Onvo is the company’s answer to cheaper SUV, with the vehicle starting to sell for about $30,000. To achieve this goal, the company has announced a plan to open 100 stores across the country.
The company now hopes to start turning a profit in the next few years, with its eponymous brand having a gross margin of 20% and its ONVO brand having 15%.
Analysts expect that its revenue will be $9.7 billion followed by $13.6 billion in 2025. Its earnings per share is expected to move from $1.53 in 2023 to $1.2 this year and 89 cents in 2026.
Nio stock price analysis
Predicting a stock ahead of its earnings is relatively tough. On the daily chart, we see that the stock peaked at $9.55 in December and has fallen to $4.15. It has also remained below the 23.6% Fibonacci Retracement point at $6.56.
Most notably, the stock has found a strong support at $3.64, where it failed to move below earlier this year. This price was the lower side of the dsescending triangle pattern. It has also moved below the 50-day and 100-day moving averages.
The stock has moved slightly above the upper side of the descending trendline. Therefore, while a lot can happen, I believe that the stock will likely have a bearish breakout after its results on Thursday.
If this happens, the next level to watch will be at $3.64, its lowest point this year. A break below that level will point to more upside.
In the future, however, there are signs that Nio will bounce back if the company manages to continue its growth trajectory.
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