Why Did Nio Tank After Earnings?
On Thursday, Nio (NYSE:NIO) reported its Q4 2021 and full-year 2021 earnings report, and the market was not impressed. In an earnings season that has absolutely punished the slightest miss by a company, Nio misstepped when it came to its earnings forecast for Q1 2022. Let’s take a closer look at its numbers.
Nio beat on revenues, posting $1.55 billion compared to an expected $1.52 billion, good enough for a 49% year-over-year rise. The company delivered 25,034 vehicles in the fourth quarter of 2021, also good for a 44% year-over-year rise. For the full year, Nio delivered 91,429 vehicles, more than doubling its output from 2020. Are you with me so far?
Gross margins also rose from 11.5% in 2020 to 19% in 2021, a sign that Nio is narrowing its losses and moving towards profitability. In all, it was a successful year in 2021, even if the stock’s performance during the year did not indicate that. This all sounds pretty good so let’s see what made Nio investors so unhappy with the call.
The guidance that Nio provided for 2022 clearly did not sit well with investors or analysts alike. For the first quarter, the company forecasted a number between $1.51 billion and $1.57 billion in revenues. This is significantly short of Wall Street’s expectations for $1.66 billion. Nio also provided a forecast of 25,000 to 26,000 vehicles being delivered, but Wall Street wanted 28,000.
Nio’s Sell off was an Overreaction
First of all, we already knew that Nio, and other EVs, are still in a pinch due to the ongoing supply chain issues and global chip shortage. Analysts from Morgan Stanley and Deutsche Bank warned us of this earlier in the week when they provided stock price target downgrades for Nio. The company has also warned us along the way, and reiterated earlier this week that it will not be raising the prices of its vehicles, which is something other EV makers like Tesla (NASDAQ:TSLA) has done.
The catalysts are still on the way for Nio which includes three new vehicles being released this year, with the ET7 sedan hitting roads at the end of March. Deutsche Bank predicted that the much anticipated ET5 sedan will be the most sought-after vehicle in China later this year. The ET5 is set for release in September and will be a direct competitor to the Tesla Model 3.
On top of that, Nio is opening a second production facility later this year, and is still working on global expansion. I get why the stock dropped but a 10% sell-off on information we already knew and some conservative predictions are an overreaction in my books. Nio is also not the first automaker to rein in delivery estimates due to the ongoing global manufacturing issues. Long-term investors will want to take advantage of these prices, as Nio is just gearing up for what will surely be a big year for the company.
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