Nio stock has retreated sharply this year, with its market capitalization falling from $16.4 billion earlier this year to $7.6 billion today. The sell-off has coincided with weakness among other Chinese electric vehicle (EV) makers. Focus will now turn to its earnings report, which should shed light on the company’s sales and cash position.
Nio earnings to show revenue growth
Nio, one of the top Chinese electric vehicle pioneers, will be in the spotlight this week as it releases its financial results.
Based on its third-quarter delivery numbers, chances are that the company’s revenue growth continued. The data showed that the company sold 37,408 vehicles in September, bringing the quarterly figures to 109,178. Its third-quarter deliveries were up by 25.4% increase from a year earlier.
Analysts expect the results to show that revenue jumped 52% to 33.1 billion yuan, with the most optimistic forecast at 34 billion yuan. They also expect earnings per share (EPS) to come in at a loss of about 0.03 yuan, a sharp improvement from the 1.14 yuan loss in the same period last year.
Investors will focus on its profits and guidance. Earlier this year, the company surprised market participants by announcing its first quarterly profit. Since then, it has consistently made losses as the cost of doing business has remained elevated.
READ MORE: Nio stock slide continues in Hong Kong as headwinds rise
Nio’s growth has stalled
Another challenge is that Nio’s strong growth has stalled. Its September delivery numbers were up by 7.7% from a year earlier. The most recent numbers showed that its deliveries continued slowing in October. It delivered 34,426 vehicles in October, much lower than the 40k it sold in the same month last year.
As a result, analysts expect the fourth-quarter revenue figures will show that the company barely grew. Yahoo Finance data shows that the revenue will come in at 34.8 billion yuan, the same amount it made in the same period last year.
The company is facing the same challenges as other Chinese manufacturers are going through. For example, the industry has become saturated, with companies releasing new car models each month. They are also pumping out millions of cars at a time when passenger vehicle sales are expected to have the worst year since 2014.
As such, while Nio shares may appear to be bargains, the reality is that the company is a value trap unless the management finds a way to grow internationally.
Nio stock technical analysis
Nio stock chart | Source: TradingView
The daily chart shows that Nio shares have been in a freefall and recently dropped to a crucial support level of $3.11, its lowest level in July last year. It has remained below all moving averages.
The stock has also remained below the important support level of $4.37, its lowest level in February this year. Therefore, there is a likelihood that the stock will likely continue falling, potentially below $3.
However, there is also a likelihood that it may have a short squeeze after publishing its financial results this week. Such a move will push it to $4.
The post Nio stock has dipped this year: Is it a bargain or value trap before earnings? appeared first on Invezz