NIOtime #11: Is NIO only worth $25?
Technical Chart. Media News Recap. NIO App Stories. All from a group of NIO global fans exclusively for the NIO community.
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Dear NIOtime family,
Happy Friday! Today NIO had the honor caught the attention of a “famous” short-seller Citron Research. A 5-pages short bearish report on NIO with a price target of $25.00 sent the stock down about 24% from the ATH to today’s low. The NIO short report built on two points: 1) Tesla MIC Model Y Pricing and 2) Share Structure. In our opinion, a cheaper Tesla Model Y pricing would impact all China EV brands, not only NIO. However, NIO is clear to position itself as a high premium EV brand which its average price is 150,000 RMB higher than that of Tesla, cited earlier by Li Bin last week during the battery launch event. In short term, local retailers may choose over Tesla for the reason of price and brand recognition. Soon or later, they realize the quality and user-oriented community may lead them to rethink their choices.
In our view, this report is instead combining opinions from different views without much details and direct evidence to prove why NIO is going to fail to capture the EV market due to competitive pricing, valuation metric, and low short interest. To us, this report is purely short for the sake of short to achieve short term gains. Let’s look at it positively, what can we learnt from today’s major sell-off?
First, our conviction on NIO is tested. We may feel fear when experiencing 20% drop intraday and urging to sell our stocks. Instead, we are still bullish on NIO stock and continue to check the fundamental since the beginning of this issue’s launch. Our view on NIO is long term while a short term frutuation is within our expectation.
Second, a major correction is healthy for the stock that is rallying since August. We agree with the reply from @FinanceLancer that a pull back is shaking weak hands off and giving chance for new NIO believers to enter. If you believe in NIO for long term, you would be comfortable to witness sell-offs and pick up some shares on each dips depending on your portfolio sizing.
Technical Chart
NIO ended this week at $44.50 which is $2.87 (6.89%) higher than last Friday’s closing price. Early this week NIO experienced a FOMO rally that drove the stock high up to another 52W high at $54.20. First jump was on JP Morgan analyst upgrade which we will cover later, second rally hop on XPEV & Li earning calls, and eventually big drop on a 5-pages short report out today.
From technical term, we saw massive volume sell-off today and NIO retested the stock at its daily EMA8 (and bounced around its hourly EMA8 ($45.43) and hourly EMA 21 ($45.18). We may continue to see NIO stock entering a high volatile environment with earning call set on after market hour next Tuesday, 17th November. Hold strong and invest safe!
This Week’s Top 7 Highlights by Niotime
Q3 Earning Call Consensus and NIOtime Expectation
Sixth Year Anniversary Celebration Prep
JP Morgan Analyst Rating Update
China Government Leader Visits NIO
NIO Power Update: 159 (1) Power Swap & 75 (0) Power Charger
NIO House & Space Update: 22 (0) NIO House & 160 (1) NIO Space
NIO November Production Update
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News
Q3 Earning Call Consensus and NIOtime Expectation
The next major catalyst for NIO is its Q3 earning call. The implied volatility of the NIO option statistics of next week's expiry options is expected to move within $10.58 either upward or downward. Let’s see what wall street analysts consensus on NIO’s earning. First, EPS is estimated at -$0.17 with the high estimate at -$0.10 and the low estimate -$0.23. Second, revenue is estimated at $ 652.77M with the high estimate at $677.3M and the low estimate $623.12M.
Our expectation hopes to see NIO can at least meet the wall street analyst consensus on the EPS and Revenue. What we really want to see NIO are whether vehicle margin and gross margin has been improved further from last quarter. Last quarter NIO achieved a single digit positve vehicle and gross margin. If we see a double digit margin for both, that would be great in getting profitability sooner. Another item is to look up its current cash reserve, whether to increase from last reported number, $1.6B. A third item we would look whether Li Bin is positive on Q4 delivery guidance, any number above 15,000 units is considered good for NIOtime. Wall street analysts expect 15,000 for its Q4 delivery.
Sixth Year Anniversary Celebration Prep
Do you know that NIO is about 6 years old? On November 25, 2020, NIO will celebrate its sixth birthday. Six years along the way, NIO has experienced high moments and low periods. Fortunately, NIO has always been accompanied by its users, sharing the joy and growing together. There will be 87 wonderful activities held in the country.
At 6 years old, NIO is thriving, and in November NIO will continue to expand the expansion of NIO Space and increase the number of power swap stations. (News and Photos Source: NIO App)
JP Morgan Analyst Rating Update
JP Morgan analysts led by Rebecca Wen on Monday raised her price target for NIO from $41 to $46 with an Overweight rating.
Wen expected NIO to enjoy a 30 percent market share by 2025, making it a long-term winner in the premium electric vehicle segment.
She said NIO has played a leading role in transforming the business model for smart electric vehicles in China, where the direct sales model for potential business and consumers is shifting to a business model that provides services through platforms and content, so a higher valuation is justified. (News Source: cnTechPost)
This is the news which led the stock rally on Monday. JP Morgan analyst is bullish on NIO’s future undertaking to share premium EV market at China. There are more works for NIO to gain further traction in premium EV market - ramp up production, attract more retail users, mantain high quality service and engaged community.
China Government Leader Visits NIO
Li Xiusong, Vice Chairman of Anhui CPPCC and Chairman of the Standing Committee of CNDCA Anhui Provincial Committee, Wang Yingchun, Secretary of CPC Bengbu Municipal Committee, Wang Cheng, Mayor of Bengbu Municipal Government and other leaders visited the NIO booth at the Anhui Industrial Design Achievement Exhibition to experience the ES8 intelligent electric flagship SUV.
Congratulation to NIO ES8 that won the Special Gold Award of the 7th Anhui Province Industrial Design Competition.
Nineteenth member of the Central Committee of the CPPCC and Deputy Director of the Economic Commission of the CPPCC Miao Wei and his delegation visited the Wulai Center|Hefei Advanced Manufacturing Base for research. CEO Li Bin accompanied the reception. (News and Photos Source: NIO App)
China government is fully support of new energy policy including electric vehicles which has laid down a concrete 15 years plan last week onto transforming the country with aggresive green energy initiatives without relying much on oil and gas. This week NIO has attracted top government officials as well as province officials to visit NIO-JAC plant and NIO booth. This is clearly a good sign that the government is putting actions to discuss and plan for creating a strong EV foundation especially the local EV brands such as NIO.
NIO Power Update: 1 NIO Power Swap built
NIO Power Swap #159 | Wenzhou Qinle
According to early annoucement, we shall see more battery swapping and power charger stations in this upcoming weeks.
NIO House & Space Update: 1 NIO Space added
NIO Space #182 | Zhenjiang Suning
From the six year celebration prep, we see 10 NIO Spaces are planned in upcoming weeks. This will bring the total NIO houses and spaces to 192 by the early December and 8 spaces away from 200 target in 2020.
NIO November Production Update
NIO's Li Bin believes the rise in market capitalization showed that the trend toward smarter electric vehicles is irreversible.
The new energy vehicle stocks have recently seen a wave of rising prices. On 13th November, NIO's market capitalization surpassed that of General Motors and ranked seventh in the global auto company market capitalization. NIO Chairman Li Bin said that market capitalization is no longer the company's business goal. President QinLi Hong revealed that the JAC NIO factory's single-shift production capacity has been full, and it started to try double-shift production in November. (News Source: Caixin Web)
This news come from China local media citing that Mr. Hong commented on coming double-shift production in November. Thanks to the intel provided by our NIOtime subsriber. This info implies that NIO is ready to ramp up production to more than 5,000 units per month to meet the users demand. If double shift production is up, it is expected to produce up till 12,500 units per month given 150,000 units per year provided by Mr. Li in earlier interview. That’s good news for NIO to increase production while also maintain high interest among potential users in upcoming months giving the fierce competition from Tesla MIC Model Y. The following months are a tough period for NIO to go through.
Summary
Last week we commented that the stock might be at a high level. The valuation might be high if we compare NIO with Tesla in terms of multiple sales. However, if NIO can boost up sales in upcoming months, one may justify the stock valuation with a larger share in the EV market in the upcoming years. We would hope for the rapid expansion of the 2nd gen battery-swapping station network, new sedan model, growing user community, and increasing user demand for premium EV to help NIO justifying the second-largest market cap of pure EV brand.
Alright, let’s looking forward to Q3 earning with more clues about the current status of NIO from CEO and CFO. We will update more on that in the next weekly issue. Have an awesome weekend!
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As a long-term investor, to some degree I agree with Citron to the point that NIO is due to some consolidation (short-term traders taking profit). However, I'm more aligned with JPM's rating update on potential future market share. Strengthening fundamentals, government support, NOP, expansion into Europe, etc. are good long-term catalysts for NIO.
Whoever came up with this is trying to capitalize on the lack of knowledge of NIO shareholders and their inability to analyze share price. 77d US, ultimately. Don't give in and sell yourselves short to Short Sellers. Invest long term in this company.