Will NIO Stock Go Up After Earnings?

NIO has been pushing electric car technology since its founding in 2014. The company currently offers sedans, coupes, and SUVs with exceptional ranges.

Management reported extraordinary revenue growth during it most recent quarter. How will the market respond to the next earnings announcement?

The Bull Case For NIO

NIO (NIO) has shown ample reasons for investors to buy shares.

Perhaps most importantly, the company’s brand recognition gained prevalence as NIO releases more vehicles and enters more markets outside of China.

NIO’s research and development team seems keenly tuned to the needs of international consumers. Releasing the ET7 four-door sedan has been particularly critical.

The company plans to sell it the luxury vehicle for about $69,000, making it extremely competitive with Tesla (TSLA) cars.

NIO (NIO) isn’t chasing Tesla, though.

The company has unique plans for attracting buyers. One innovative opportunity involves a battery subscription model for owners. Improvements in battery technology are going to happen quickly over the next few decades.

Consumers interested in electric cars know this, so many of them want to wait until they can buy EVs with long-range, fast-charging batteries. The Battery as a Service (BaaS) subscription model eliminates that barrier so buyers don’t have to feel nervous about missing the next innovation.

Orders for NIO products have also increased. A global microchip shortage has prevented several car manufacturers from completing their builds. Despite this, NIO says that it has a plan to deliver about 22,000 vehicles during the second quarter of 2021.

NIO Earnings Estimates Are Blossoming

NIO earnings estimates indicate that the company has a strong future.

NIO has a $5.41 billion average revenue estimate for 2021. Even pessimistic analysts put its estimated figures at $5.08 billion. In 2020, NIO did $2.55 billion in sales. Nearly every analyst, therefore, believes that NIO will double its revenues in 2021.

The estimates for 2022 are even brighter.

The average revenue forecast puts NIO at $8.9 billion. The low revenue estimate claims $7.29 billion. The highest estimate comes to $11.88 billion. Even assuming that NIO only reaches the low estimate, such an accomplishment should prove that the company has enormous value.

NIO Earnings Whisper Number

Six out of nine analysts recommend buying the stock, which is fairly persuasive but not enough to convince a skeptic.

The Earnings Whisper indicates that NIO’s earnings estimates will decrease which seems to contrast significantly with the fundamental expectations of soaring revenue and earnings over the next few years.

NIO: The Bearish Argument

The bullish argument has plenty of strong fundamentals backing it up. Still, plenty of analysts are taking the bearish position that the company will not perform as well as forecast.

Many analysts have faith in NIO as a company. They just don’t believe in its short-term growth. They claim that the stock is overvalued currently and not worth buying until there is a NIO share price dip. Then, they can reap the long-term rewards as NIO slowly reaches its potential.

The bearish argument largely relies on two related points:

• Price has run too far: The electric vehicle rally of 2020 went too far, pushing several companies far above their intrinsic fair market values.
• Valuation is stretched: Bears also point out that NIO might have an excessive market capitalization. Currently, NIO has a market capitalization of about $61 billion, which is pretty close to the combined market capitalizations of giants like Ford and Stellantis. How could such a young company with so few products come close to matching those established companies?

Regardless of the merit of these points, NIO’s valuation has not approached the industry leader, Tesla – that has some believing there is a long runway of price gains still ahead of NIO. 

NIO Post Earnings History

When it comes to most recent Nio earnings reports, the following factors offer crumbs to both bulls and bears to cling to:

• Falling short of the March 2021 earnings estimate ($6.71 billion), although “only” by $70 million.
• Earning more than expected in all but one quarter in 2020 (and still coming out ahead of the annual expectation).
• Market cap of $66.99 billion exceeds that of many leading and proven car manufacturers

Over the medium term, Nio has had a bullish history of running higher post earnings. The share price is volatile and should be approached with caution for conservative investors who fear sharp spikes and dips.

Will NIO Go Up After Earnings?

There are strong arguments to be made for NIO’s future.

On the horizon is the expectation that Nio earnings will shift from negative to positive. When Tesla earnings finally turned, a tectonic shift occurred in Tesla share price. It rose by a full order of magnitude. Will Nio follow in a similar vein? 

Rising revenues offer lots of justification to be optimistic about where the share price is headed over the coming few years. Even stocks like Amazon will show seasonality to revenue forecasts but Nio revenues remain steadily rising and expectations are for that to continue every quarter. With no slowdown in sales expected any time soon, the odds favor Nio bulls medium and long-term.

 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.