Benzinga
NIO gets ready to report fourth quarter earnings as stocks pull back from recent highs
In the electric vehicle (EV) industry, profitability is often second to future expectations. So when China-based electric vehicle maker NIO Inc (NYSE: NIO) opens the hood next week, investors are likely to be more interested in their prospects for vehicle revenues and deliveries than how much the company has lost. during the quarter – except for one big flaw or big surprise, of course. Earlier this year, NIO said it delivered a record 17,353 vehicles in the fourth quarter. While this is minuscule compared to Tesla Inc’s 180,570 deliveries (NASDAQ: TSLA) during the quarter, the NIO number represents a 111% increase year over year and exceeds the upper limit of its guidance from 16,500 to 17,000 vehicles for the quarter. Speculative and fundamental drivers While growing deliveries are encouraging for NIO bulls, the company is in the red. In other sectors, you can expect modest share price action for a company that loses money, with negative future and future price / earnings ratios. It is not so for NIO. Stock gains accelerated last year and earlier this year, reaching a record high of around $ 67 in January. The stock started in 2020 at around $ 4 (see figure 1). FIGURE 1: HIGH VOLTAGE. On a percentage basis, the shares of Chinese electric vehicle manufacturer NIO (NIO – candlestick) gave Tesla (TSLA – purple line) a run for its money last year. However, both NIO and TSLA have lost some of their energy in the past few days. Data sources: Nasdaq, NYSE. Graph source: the thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results. Part of this surprising gain probably came from general market dynamics amid low interest rates, accommodating central banks, real and anticipated stimulation of the coronavirus and anticipation of a post-vaccine recovery. There may also have been an element of investors looking for momentum in a hot stock. Getting $ 1 billion in financing from Chinese state-owned companies also helped. It is also debatable that there may be more fundamental favorable winds helping NIO’s actions to accelerate in 2020. Demand for EVs has increased as battery life increases, costs decrease, more charging stations are built and environmental concerns further advance the public’s awareness. But in the EV space, investor optimism about the potential of manufacturers can make companies look bigger than life itself. Call it the Tesla effect, as investor optimism helped make this company the most valuable car maker on the planet in terms of market capitalization. Still, like the vehicles it makes, NIO’s shares cannot accelerate forever. After breaking the record in January, stocks fell dramatically. Part of this may be the realization of profits and cooler heads prevailing before their release of results. There may also be some caution around the tariff relationship between the United States and China, the two largest economies in the world. NIO earnings and options activity When NIO reports earnings after closing on Monday, March 1, it is expected to report a loss of $ 0.07 per share, according to consensus analyst estimates. the 3rd. Revenue is projected at $ 1.01 billion, an increase of 148% over the previous year. Note: the consensus may perhaps come with an asterisk, as only a handful of analysts cover the company. The options market priced an expected 11.5% share price move in any direction around earnings disclosure. The implied volatility is at the 25th percentile on Friday morning. Looking at the expiration of the options on March 5, sales activity was higher at 35 and 40 strikes. However, more activity was seen on the positive side, particularly in the 50 and 60 strike calls. Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price for a specified period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a period of time. Investors connect In addition to earnings data, investors in the next week can seek new guidance from the company. At the top of the list: they will likely hear an update on NIO’s battery technology. Batteries are the foundation of the EV market, as more efficient batteries, which can store more energy, mean that vehicles can stay longer without charging, giving drivers more peace of mind. In January, NIO launched its first sedan, called ET7, which has a range of more than 500, 700 or 1000 kilometers, depending on the battery. Investors are likely to want to know how the orders for this vehicle are, whose deliveries are due to begin next year. Investors are probably also looking to the competition. The EV market has become more crowded, with new interest not only from traditional auto companies and EV startups, but also from major technology companies such as Apple Inc (NASDAQ: AAPL) and Amazon.com, Inc. (NASDAQ: AMZN ). Space for everyone? Still, despite the always crowded field, the cake is very big (and it should get bigger). Even though NIO has never ventured outside of China, the largest EV market in the world is a very large playground. Technology analyst firm Canalys in a recent report predicted that 1.9 million electric vehicles will be sold in China this year, well above the record 1.3 million in 2020. As a Canalys executive said in comments that accompany the report: “With only 6.3% of all passenger cars sold in China in 2020, EVs have many years of growth ahead of them. ”Comments from TD Ameritrade® for educational purposes only. SIPC member. The options involve risks and are not suitable for all investors. Read Characteristics and risks of standardized options. 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