Chinese electric vehicle (EV) maker NIO (NYSE: NIO) will report its third-quarter earnings Tuesday before the US stock market opens.
NIO stock has risen 10-fold this year, making all of its developments highly watched, especially after it was targeted by short-seller Citron on November 13.
NIO stands out in the crowded electric car market, but the young, fast-growing company is still looking for a profit.
Wall Street forecasts NIO's third-quarter revenue to grow 135 percent year-on-year to 4.33 billion yuan. During the second-quarter conference call, NIO executives forecast third-quarter revenue of RMB 4.0475 billion to RMB 4.21 billion, up about 120.4 percent to 129.3 percent from the same period last year.
Over the past three years, NIO's average sales growth rate has been 508 percent.
Wall Street is forecasting a net loss of RMB 1.409 billion, and while earnings remain elusive, the extent of the loss is narrowing. In the last quarter, NIO's vehicle margins turned positive for the first time at 0.097%.
Wall Street forecasts NIO's third-quarter loss of RMB 1.30 per share, and analysts also forecast NIO's loss per share to narrow 55% to $0.69 for the full year in 2020 and further to $0.49 per share in 2021.
The company's revenue is expected to nearly double throughout both 2020 and 2021.
At the start of the year, NIO's sales fell sharply due to Covid-19 but quickly rebounded.
In the second quarter, NIO deliveries doubled, up 191% year-on-year.
It saw a 154% year-on-year increase in deliveries to 12,206 units in the third quarter, while the company had expected deliveries to reach 11,000-11,500 units, up about 129.2%-139.6% over the same period last year.
In October, NIO production surpassed the 5,000-unit milestone for the first time.
NIO exceeds 5,000 vehicles off the assembly line for first time in a single month
NIO production and sales are encouraging and Wall Street is becoming more optimistic as a result. NIO currently has 3 strong buy ratings, 6 buy ratings, 5 hold ratings, and 1 sell rating.
Citi believes that NIO's growth prospects will be brighter as the electric vehicle industry grows, raising its price target to $46.40 from $33.20.
Citi said the positive outlook is largely due to NIO benefiting from a strong backlog of orders and high margin visibility, with processing gross margins expected to reach a level of 13-16% in the third quarter.
Chinese EV makers shares surge as Citi issues bullish report on NIO, XPeng, Li Auto
Citi expects NIO's gross margins to reach further levels of 22-25% in the fourth quarter.
In addition, NIO's share price is also benefiting from increasing market share, decreasing battery costs, and the prospect of export-related policy headwinds.
On November 9, JP Morgan analysts led by Rebecca Wen raised her price target for NIO from $41 to $46 with an Overweight rating.
NIO went public in September 2018 at $6 before falling to a low of $1.19 in late 2019 due to sales and cash shortages.
The stock rose by 130 percent from the end of September to Thursday. However, on Friday NIO was under high selling pressure due to a short-selling report.
US short-seller Citron said on Friday it was shorting NIO and said after a rocky road of trading, NIO has found itself in unchartered territory that can never be justified by its current standing in the China EV market or its near-term prospects. Citron gives NIO a price target of $25.
Citron said in a report that the recent mania of investors flocking to electric car makers in China shows no deeper understanding of a market that is marked by price cuts.
What makes NIO stock most vulnerable at these levels are 2 main points, the report said.
NIO shares were down by 7.74 percent in panic selling to trade at $44.56 as of market close on Friday. The stock was up by more than 10 percent in early trading hours.
Details of Citron's report can be found below.
Short seller Citron is shorting NIO, says stock should go back to $25
It's also worth noting that Bridgewater Associates, the world's largest hedge fund, is doubling down on NIO.
Bridgewater Associates held 1,569,456 NIO ADS shares worth $33,304,000 as of September 30, 2020, according to an SEC filing on November 13.
As cnTechPost reported earlier, Bridgewater held 856,026 shares in NIO ADS shares worth $6.6 million as of June 30.
The comparison of the two positions means that Bridgewater added an additional 713,430 NIO ADS shares during the third quarter, an increase of 83% from its position at the end of the second quarter.
World's largest hedge fund almost doubles its position in NIO in Q3
