nio provided strong forecast

NIO stock (NYSE: NIO) is trading higher in US premarket price action today after releasing its third-quarter earnings. While the company’s losses widened in the quarter, it provided strong guidance for the fourth quarter.

NIO reported revenues of $1.83 billion in the quarter, which is 32.6% higher than the corresponding quarter last year and a new record for the company. The rise in revenues was primarily driven by higher deliveries.

NIO delivered 31,607 vehicles in the third quarter of 2022 which was 29.3% higher than the third quarter of 2021. Notably, NIO’s deliveries are constrained by supply chain issues.

In October, NIO delivered 10,059 EVs (electric vehicles), a YoY rise of 174.3%. The company has delivered 92,493 cars so far in 2022 which is 32% higher than the corresponding period last year. NIO’s cumulative deliveries have now reached 259,563.

NIO sold 5,979 SUVs and 4,080 sedans in October. Talking of specific models, it sold 2,814 ES7s, 3,050 ET7s, and 1,030 ET5s.

NIO Reported a Massive Loss in the Third Quarter

NIO posted an adjusted per-share loss of 30 cents which was wider than the 6 cents per share loss that it posted in the corresponding quarter last year. The company posted a gross profit margin of 13.3% in the quarter, which while 30 basis points higher than the previous quarter, was way below the 20.3% gross margin that it reported in the third quarter of 2021.

Like fellow automakers, NIO is also grappling with higher costs as material as well as logistics costs have surged over the last year. It has raised prices for some models but still hasn’t been able to fully pass on the higher costs to buyers.

Incidentally, earlier this month, Tesla tweaked its insurance incentive in China. The Elon Musk-run company also lowered car prices in China last month. Tesla stock has fallen to a two-year low amid the drama over Elon Musk’s Twitter acquisition.

Several analysts have turned apprehensive about Tesla stock after Musk’s Twitter acquisition. Meanwhile, some other analysts, especially Morgan Stanley maintain their buy rating on Tesla stock.

Coming back to NIO, the company is quite bullish on its ET5 model and market entry into Europe. It said, “we have witnessed strong growth momentum in user demand and robust foot traffic, especially after the debut of ET5s in stores from September, and expect the ET5 delivery will support a substantial acceleration of our overall revenue growth in the fourth quarter of 2022.”

Last month, NIO unveiled ET7, EL7, and ET5 models for Europe. Fellow Chinese EV makers are also entering Europe as the EV competition intensifies globally.

NIO Provided Strong Sales Forecast for the Fourth Quarter

NIO provided a strong sales forecast for the fourth quarter of 2022. It expects to deliver between 43,000-48,000 cars in the fourth quarter and forecast revenues between $2.4-$2.7 billion for the quarter.

It said, “This business outlook reflects the Company’s current and preliminary view on the business situation and market condition, which is subject to change.” Notably, the operating environment has been quite fluid in China where NIO produces all its cars.

The country is sticking with the controversial zero-COVID policy even as it is taking a toll on economic activity. NIO’s production was also impacted in the second quarter due to the lockdowns.

EV Stocks Have Sagged This Year

EV stocks have sagged this year and Arrival has flagged “going concern risk.” However, NIO boasts of a strong balance sheet and had $7.2 billion as cash on its balance sheet at the end of September. While the cash pile came down from $8.1 billion at the end of the second quarter, it is nonetheless good enough looking at NIO’s cash needs.

While NIO stock has sagged this year, most analysts are bullish on the company. Ron Baron added more NIO shares amid the crash. The billionaire fund manager also added shares of Lucid Motors in the second quarter of 2022. We have a guide on how beginners can buy NIO stock.

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