Nio Earnings Are Far Worse Than Feared, China's Tesla Gives Weak Outlook| Investor's Business Daily

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Nio (NIO) gave a weak revenue guidance for the current first quarter early Wednesday after missing earnings and revenue estimates for the final quarter of 2022. Nio stock rose in premarket trade.

Along with a much worse-than-expected Q4 loss, the Chinese premium EV startup reported plunging margins due in part to “losses on purchase commitments.”

The Nio earnings release Wednesday alluded to growth plans in 2023, including “five new products” based on a next-gen EV technology platform 2.0, without offering details.

Nio also reported 12,157 electric vehcile (EV) deliveries in February, up from 8,506 in January. Meanwhile, an internal review into a short-seller report found the key allegations “are not substantiated,” it added.

China’s EV makers are ramping up after Covid-fueled supply disruptions last year.

Nio Earnings

Estimates: Analysts polled by FactSet expected Nio to widen losses to 26 cents per ADR share from 17 cents a year ago. Revenue was seen jumping 58%, year over year, to $2.462 billion.

That would mark Nio’s first $2 billion revenue quarter. It first topped $1 billion in Q4 2020.

The startup, sometimes called China’s Tesla, has already disclosed Q4 2022 deliveries of 40,052 electric vehicles. That was well off initial guidance of 43,000-48,000 EVs, due to Covid-fueled supply disruptions and operational issues.

Results: Nio lost 44 cents per ADR share on revenue of $2.329 billion.

Both vehicle margin and gross margin fell sharply vs. the year-ago quarter and vs. the prior third quarter. Nio cited “inventory provisions, accelerated depreciation on production facilities, and losses on purchase commitments for the existing generation of ES8, ES6 and EC6” EVs.

Nio disclosed a cash and cash equivalents balance of $6.6 billion at the end of December. That was down from $7.2 billion at the end of September.

Outlook: For the current first quarter, Nio guided revenue of $1.584 million-$1.674 million. The midpoint of $1.629 billion is far below FactSet consensus of $2.505 billion.

The startup guided 31,000-33,000 EV deliveries in a seasonally weak Q1. That would be up 20.3%-28.1% from a year ago but below Q4’s 40,052 EV deliveries.

In fiscal 2023, Wall Street expects Nio to lose 66 cents per share vs. an estimated loss of 97 cents in 2022. Revenue is seen bounding 84% next year.

NIO Stock, China EV Stocks

Shares of Nio rose 1.1% to 9.49 in early trade on the stock market today, below a falling 50-day moving average. After a four-week slide into earnings, Nio stock is back near October’s two-year lows.

Premium EV peer Li Auto (LI) advanced 1.3% Tuesday, bouncing from its 50-day line and extending its post-earnings rally on upbeat delivery and revenue guidance Monday. XPEV stock popped 3.8% Tuesday but remains not far above record lows.

Ahead of Nio earnings, investors were looking for a recovery in EV deliveries following the seasonally weak current quarter, as production headwinds ease.

After Tesla (TSLA) price cuts in China, some analysts warn that EV demand could weaken for the U.S.-listed Chinese EV startups, especially Nio and XPeng (XPEV). Both have cut EV prices after Tesla’s cuts.

Li outsold Nio and XPeng in the final quarter of 2022. Then, in a seasonally soft January, all three Chinese EV startups recorded year-on-year sales declines.

Li, Nio and XPeng will report February deliveries on Wednesday morning, as well. Weekly China EV registration data suggests higher monthly sales for all three startups.

In Q2, analysts hope for a recovery as new models roll out and EV production ramps up.