Chinese electric car maker, NIO beats estimates in third quarter earnings

Nio (NIO) topped third-quarter estimates and gave strong guidance late Tuesday, after Tesla’s (TSLA) emerging Chinese nemesis became the target of a short seller. Nio stock fell late.

The report comes after EV rivals Li Auto (LI) and Xpeng Motors (XPEV) both reported mixed results and bullish guidance.

But Chinese electric-car stocks sold off after short seller Citron Research targeted Nio stock, advising investors to rotate out and book profits.

Nio Earnings Report
Estimates: Wall Street expects the electric-SUV maker to lose 15 cents a share vs. a net loss of 33 cents per share a year ago. Revenue is seen jumping 144% to $628 million.

Results: Loss of 12 cents a share on revenue of $666.6 million.

Nio had already disclosed that Q3 deliveries surged 154% to 12,206 vehicles, surpassing the high end of its own guidance. October deliveries also more than doubled year over year.

Also in Q3, Nio began deliveries of the new, more affordable EC6 electric crossover and launched its car “battery-as-a-service” business.

Outlook: Nio sees Q4 revenue of $921.8 million-$947.9 million, above consensus for $742 million, and deliveries of 16,500-17,000 vehicles

Nio Stock
Shares fell 2% late after closing up 2.2% at 46.59 47.11 in Tuesday stock market trading. The relative strength line for Nio stock has come off highs after bolting up since October, according to MarketSmith chart analysis. It’s the blue line in the chart shown. Earlier this year, Nio stock vaulted on an improving financial picture and strong word-of-mouth for its electric SUVs.

Among other electric car stocks, Li Auto fell 1.4% and Xpeng lost 2.71%. On Monday, Citi analysts upgraded Li Auto stock to buy with a price target of 45.60 and hiked their Xpeng price target to 57.71 from 34.70. Tesla, which is joining the S&P 500 index, jumped 8.2%.

Nio Vs. Tesla
Nio has emerged as a bigger threat to Tesla in China. It plans to expand into Europe in 2021, following Tesla’s recent move to export Chinese-made Model 3s to the region.

Meanwhile, Nio’s new EC6 electric crossover launched in late September and reportedly generated a strong backlog of orders. The sporty, youth-oriented “electric coupe SUV” is seen as a rival to the upcoming Model Y in China. Even more, investors will look for updates on a new electric sedan set to launch next year, challenging the Model 3.

Both vehicles push Nio into the more affordable segment of electric cars. Founded in November 2014, Nio began selling the premium seven-seater ES8 electric SUV in June 2018 and the five-seater ES6 in June 2019. Nio stock backers include Chinese gaming and social media giant Tencent (TECHY).

Along with earnings, investors will watch how well Nio controlled costs as production and deliveries increased. They will likely want to know how Nio’s brand-new battery subscription business, underpinned by a new battery company, is doing. Nio launched the battery initiatives in August, aiming to ease pain points tied to owning an electric vehicle.

Not least, Nio’s margins and cash balance will be watched, as measures of operational efficiency. At the end of June, Nio had $1.6 billion in cash. Gross margin improved from negative 12.2% in Q1 to positive 8.4% in Q2.

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