Nio’s Stock Gains 11.62% on Week, What To Expect With Earnings Looming (NYSE: NIO)

NIO (NYSE: NIO), the Chinese electric vehicle maker, finds itself at a crucial juncture, facing both near-term challenges and long-term opportunities in the rapidly evolving EV market. With earnings on deck this week, we take a look at what markets are expecting, along with some of the recent trends in Nio's stock price.

Nio's stock closed out the last week of trading at $4.90, marking an impressive 11.62% gain on the week, and 7.69% YTD. This stands in stark contrast to the recent performance of industry rival Tesla's stock, down 1% on the week, and 34% year-to-date. Zooming out however gives a different picture, as TSLA ~44% gain in 12 months, and NIO's 1.55% decline can attest. This is a sector that is seemingly shifting to Asia, with Chinese listed BYD also a notable gainer, both YTD (+40%), and over the past year (+74.4%). Whether shifting tides will help Nio is another question.

The immediate focus for investors is NIO's upcoming Q4 2024 earnings report, scheduled for March 21, 2025, before market open. Analyst consensus points to a loss of $0.33 per share, a slight improvement from the $0.39 loss reported in the same quarter last year. Revenue is projected to increase by 18.6% year-over-year, reaching $2.79 billion, a healthy rise on the $2.36 billion from last year's report. These estimates, however, come on the heels of a mixed Q3 2024 performance, where NIO beat on EPS, but missed on revenue.

The stock's recent volatility is further complicated by conflicting signals from moving averages. The 50-day moving average crossed below the 200MA towards the end of February, usually a bearish signal, or death cross. The stock has since risen more than 10% from that point, creating some disconnect in technicals. This divergence underscores the uncertainty surrounding NIO's short-term trajectory.

NIO's financial performance in 2023 reflects the challenges faced by many EV startups: growing revenue but widening losses. Revenue climbed 12.89% to 55.62 billion CNY, but losses deepened by 45.2% to -21.15 billion CNY. This financial strain has contributed to recent cost-cutting measures, including reported layoffs across multiple teams, impacting approximately 10% of the workforce, primarily within the sales and service segments.

Despite these headwinds, NIO is actively pursuing growth and expansion. The company has reported strong early demand for its new mass-market brand, Onvo, and has opened pre-orders for the Firefly, a compact EV targeting urban consumers. CEO William Li has expressed confidence in a “much more competitive product” in the pipeline, suggesting further innovation is on the horizon. Sales figures, while volatile, are looking positive with February 2024 deliveries growing by 62.2% year on year.

Li has set an ambitious target of achieving breakeven on a full-year basis by 2026, a goal that hinges on both rising shipments and continued cost control. This reflects a long-term strategic view, as Li himself stated in 2021, he stated he does not concern himself too much with the “short-term stock adjustments”.

Analyst sentiment remains mixed, with a consensus “Hold” rating and an average price target of $5.25, although individual forecasts range from a low of $3.90 to a high of $7.20. The stock price had a notable surge of 17% ahead of the Q4 earnings report, partially fueled by a bullish upgrade on Chinese equities from Citi, it is to be seen if this boost will be maintained. One analyst maintains that NIO's stock is fully valued at $5.25, suggesting limited upside potential at the current price.

Ultimately, NIO's future success will depend on its ability to navigate the fiercely competitive Chinese EV market, manage its costs effectively, and successfully execute its expansion plans. Investors will be closely watching the upcoming earnings report for signs of progress towards profitability and clarity on the company's strategy for capitalizing on the growing global demand for electric vehicles.