Nio Stock Still Remains Undervalued, Despite Mixed Q1 Guidance

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US-listed Chinese premium electric vehicle maker Nio published a relatively strong set of Q4 2021 results on Thursday. While revenue grew by 49% to about $1.55 billion, marginally ahead of consensus, driven by strong demand for the company’s ES8, the ES6, and EC6 vehicles, net loss per American depository share stood at $0.16, in line with estimates. Nio’s vehicle production also appears to be getting more efficient, with vehicles gross margins standing at 20.9%, up from 17.2% in Q4 2020 and 18.0% in Q3 2021. This is encouraging, given that inflation has been trending higher amid rising battery commodity and component costs. However, Nio’s delivery outlook was weaker than anticipated, likely due to the ongoing semiconductor shortage, which is constraining production. For perspective, Nio’s Q1 2022 guidance implies a little over 10,000 deliveries for March – about 35% higher year-over-year, although it marks a decline from December 2021 levels.

We still think Nio stock remains undervalued. Nio trades at about 3.7x consensus 2022 revenues, roughly in line with Chinese rivals Xpeng stock and Li Auto and well below Tesla stock which trades at around 12x forward revenue. There are multiple factors that could help Nio stock be re-rated higher. Nio’s existing vehicles are very well reviewed and the company will expand its lineup further this year, with the launch of the ET7 full-size sedan, followed by the ET5 compact sedan. Nio is also looking to aggressively expand globally, with plans to enter markets including Germany, the Netherlands, Sweden, and Denmark in 2022. Separately, recent reports of the Chinese government’s support of overseas stock listings could also bode well for Nio and other Chinese ADRs that have faced considerable pressure in recent months, amid regulatory and delisting concerns in the United States. Nio stock also appears to be seeing some momentum once again. While the stock fell by over 50% this year, to levels of about $14 per share as of early March, it recovered considerably over the last few trading days, currently trading at about $20 per share.

Check out our analysis on Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for more details on how NIO stock stacks up versus its peers.

Here you’ll find our previous coverage of Nio, where you can track our view over time.

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