Jun 08, 2023

Electric vehicle maker NIO will be in focus this week as it releases its latest earnings.

NIO – Weekly Chart

NIO – Weekly Chart

The price of NIO now trades at $7.78 after a continued downturn with resistance at the $13 level. NIO stock has not been a winner in the 2023 tech recovery rally, with losses of 21%. Overall, the stock has lost 58% over the last year.

With the EV maker set to report 1Q 23 earnings this Friday, Deutsche Bank’s Edison Yu sees that Nio is “suffering from weaker-than-expected demand.” 

“While production and supply-chain issues appear to be resolved, the underlying demand for its premium BEVs has been disappointing with customers opting for BBA gasoline models and Li Auto EREVs,” the analyst explained. “We attribute this underperformance to a combination of factors: high pricing, customer preferences, and ineffective marketing efforts.”

Ahead of the earnings release, Yu is anticipating a weaker quarter with “margin downside risk and a very weak 2Q volume/margin outlook,” below consensus estimates. 

Nio recently announced quarterly deliveries of 31,041, at the lower end of its 31,000-33,000 forecast. Yu is expecting revenue of 10.9 billion RMB in Q1, compared to a consensus of 11.7 billion RMB.

NIO Stock Forecast

Another headwind for Nio has been the success of rival EV maker BYD. After the success of Tesla, investors were looking at Nio as a potential Chinese competitor. However, domestic companies have given the company a battle.

With weaker underlying fundamentals, it may be hard to mount a solid long-term rally from here. However, traders can look for a short-term move based on the earnings and plan accordingly. 

With the premium segment “electrifying more slowly than anticipated” and demand muted, Deutsche Bank is not too hopeful for Q2.

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