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Earlier this month, we provided a warning to prospective investors of China-based electric vehicle manufacturer Nio (NYSE:NIO). Now, we have more data on Nio, and the bearish argument is only getting stronger. We’re assigning a “D” grade to NIO stock and we don’t recommend buying it now.
Nio can use all kinds of tactics, like trying to sell a $3 million car (no, that’s not a misprint; the price tag will actually be the equivalent of $3 million). Nevertheless, Nio’s financial data is where the rubber meets the road. And if the data tells you to steer clear, then there’s no urgency to test-drive an investment in Nio.
Nio’s Awful Quarterly and Annual Results
Not long ago, Nio published its results for 2023’s fourth quarter as well as the full year. Suffice it to say, there’s plenty of fodder for the bear case to be found here.
Let’s start with the most important big-picture statistic. Alarmingly, Nio lost 20.7198 billion RMB in 2023, which is substantially wider than the company’s net loss of 14.4371 billion RMB from 2022. To put this in dollar terms, Nio lost a whopping $2.9183 billion last year.
Now, we can drill down to 2023’s fourth quarter. Nio generated revenue of 17.1032 billion RMB or $2.4089 billion during the quarter. As biedexmarkets.com contributor Chris MacDonald observed, “This number was slightly less than what analysts expected, and drove some bearish sentiment around the stock.”
There was also a margin miss (or two) for Nio in Q4 of 2023. The company’s quarterly gross margin of 7.5% fell short of Wall Street’s call for 10.2%. Additionally, Nio’s vehicle margin for the quarter came in at 11.9%, but analysts had expected 13.6%.
NIO Stock Gets Two Price-Target Cuts
Will the situation improve for Nio in the near term? Don’t count on it. For the current quarter, Nio expects to deliver between 31,000 and 33,000 vehicles.
That’s below the 50,045 vehicles that Nio delivered in the fourth quarter of 2023 and is also below the analysts’ consensus estimate of slightly more than 44,000 vehicle deliveries for Q1 2024. Surely, the market is aware of all this, and now it makes sense that NIO stock is down significantly in 2024 so far.
Analysts, undoubtedly, also see the writing on the wall for Nio. For instance, Morgan Stanley analyst Tim Hsiao reportedly reduced his Nio share-price target from $13 to $10 not long ago.
That target might actually be too optimistic, though, since NIO stock traded at $5 and change in mid-March. Meanwhile, Bernstein analyst Eunice Lee reportedly cut her Nio share-price target from $7.50 to $5.50. This is probably more realistic than Hsiao’s $10 target.
NIO Stock Is Susceptible to Further Downside
Given the aforementioned data points, and considering the fierce competition in the EV space, even Lee’s $5.50 Nio share-price target may be too optimistic. Unless Nio turns a corner and starts posting more favorable data, Nio shares could lose much more value.
Since Nio doesn’t expect to sell a huge number of vehicles during the current quarter, it’s hard to give NIO stock a confident rating now. Therefore, we’re assigning the stock a “D” grade and aren’t currently recommending an investment in Nio.
On the date of publication, neither Louis Navellier nor the biedexmarkets.com Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
