NIO share price slides 13% after missing Q4 profit forecasts

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Finn Johnson
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Chinese electric carmaker NIO has been one of the hottest retail stocks during the past year, with the company’s share price reaching highs of $66.99 in January of this year. However, shares in the company have cooled off during the past two months and slid further downward today, closing at $43.29, after larger than expected losses in Q4 of 2020.

NIO’s Q4 results summarised

NIO announced a mixed set of results at their Q4 2020 earnings call on Monday evening.

Total Q4 revenue was positive for the company, growing 46.7% quarter over quarter to $1.03bn, and thus beating analyst forecasts of $1.01bn. Vehicle sales also accelerated in Q4 by 44.7% quarter over quarter, which the company’s CFO Steven Feng attributed to NIO’s improved product range and the expansion of NIO Spaces in 2020.
Nio Spaces, the company’s trademark showrooms, offer customers a unique, personal shopping experience, aiming to appeal to the company’s high-end target market. There are now 303 NIO Spaces in China spanning across 121 cities, having been less than 100 at the beginning of 2020, which underlines the impressive growth of NIO’s sales and service network in 2020.

However, positive results in these areas were overshadowed by wider than expected losses in Q4, which came in at $0.15 per share, double analyst projections of $0.07 losses per share. Subsidy cuts and increased competition to NIO such as the Tesla made-in-China Model Y, both contributed to a more competitive pricing market and hence larger losses than in previous quarters.

Future Outlook for NIO

NIO’s results have split investors opinion. JP Morgan lowered its price target from $75 to $70 for the electric carmaker, whereas HSBC raised its price target marginally from $44.70 to $54; and whilst the company’s share price suffered on Tuesday, many of the positive aspects of NIO’s business model that have appealed to investors in the past year still ring true.

Overall, 2020 was a great year for NIO, with revenue and vehicle deliveries both doubling year over year. The company also expanded its sales network and product range extensively as mentioned before, which the company’s CEO, William Li, expects to be crucial in supporting an elevated number of deliveries in the first quarter of 2021 and beyond. The company expects roughly 20,000 vehicle deliveries in Q1 2021 which would represent a roughly 15% quarter over quarter increase. As well as this, he also outlined what a “clear path” for NIO to surpass 100,000 sales during 2021 as the company further penetrate the premium end of a growing Chinese EV market, and expands its operations into Europe.

NIO, like many other carmakers at the moment, mentioned concern over the impact the global chip shortage is expected to have in 2021. Specifically, the company warned that the shortage of chips and batteries would likely lead to a 25% decrease in vehicle production during Q2.

Overall, though, NIO’s long-term growth prospects remain strong. The global chip shortage is a problem impacting all carmakers at the moment and may cause NIO’s share price to remain depressed in the short-term. However, with NIO’s share price currently sitting at its lowest level since December 2020, it resembles a nice opportunity for investors seeking to enter a long-term position in the Chinese electric vehicle company.

This article offers general information about investing and the stock market, but should not be construed as personal investment advice. It has been provided without consideration of your personal circumstances or objectives. It should not be interpreted as an inducement, invitation or recommendation relating to any of the products listed or referred to. The value of investments can fall as well as rise, and you may get back less than you invested, so your capital is at risk. Past performance is no guarantee of future results. If you're not sure which investments are right for you, please get financial advice. The author holds no positions in any share mentioned.

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