NIOtime #14: Why NIO down 20% this week?

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 gang,

It’s NIO time, Blue Sky is Here!

Happy weekend! You might be FUD on the fact that NIO was down 20% this week. Our previous weekly commentary entitled “ Don’t FUD and Stay Long” commented below

In our humble opinions, we are never going to time the market right all the time, the best way to do for long term convicted stock is HODL. So this week's takeaway for us is to always do our own due diligence for the company we believe in. 

This week we observe that the feelings of fear, uncertainty, and doubt (FUD) were all over social media. We would once again urge our NIOtime gang to look at the investment from long-term perspectives by constantly checking the company’s fundamentals and updating our conviction from credible sources online.

Let’s remind each other in this environment which full of noisy signals and negative voices that might distract our focus onto the fundamental of the company we believe since the beginning. To keep the NIOtime gang convicted and not shaking off from the boat are one of NIOtime’s goals for publishing weekly commentary consistently. There are a series of exciting events awaiting us ahead. Please take a look at the updated $NIO catalyst on our Twitter.

NIOtime @theniotime

$NIO catalysts by 12/1: 1/ December delivery # (1/4) 2/ NIO Day 2020 @ Chengdu (1/9) 3/ New Sedan Model (1/9) 4/ NP2 Platform Reveal (1/9) 5/ Production up 7,000 units/month (Jan 21) 6/ 2nd Gen Power Swap (1H21) 7/ International Market Entry (2H21)

*correction to 5/ Production up 7,500 units/month (Jan 21)

Technical Chart

This week NIO closed the week at $43.04 which is about 20.0% lower than last week’s closing price ($54.00). NIO experienced major selloff since the beginning of the week and hit the lowest point of the week at $38.33. The major selloff we believe is due to the bill S.945 - Holding Foreign Companies Accountable Act voting on Wednesday, potential sector rotation from EV sectors to other value sectors given effective vaccine results, as well as potential chain effect from LI further stock offering on Thursday.

From the technical chart, NIO broke its bullish setup and reversed the upward trend by looking at that golden cross from MACD chart. However, NIO hasn’t crossed on EMA8 and EMA21 yet. The cross over point between EMA8 and EMA21 would signal a confirmed downward trend for NIO. Now NIO is slightly off from EMA21 ($45.20) and would see if NIO can bounce above this price level next week. The next level we would watch closely is lower BB band ($39.07) and MA50 ($34.67).

Given next catalyst is near the end of the month and the beginning of next year, NIO may consolidate, behave sideways or experience shorts pressure to push the stock further down. Let’s invest safe and look at the long term timeline.

This Week’s Top 7 Highlights by @theNIOtime

1. NIO November Delivery Number - 5,291

2. NIO and The Bill S.945

3. GS, UBS Ratings on NIO’s Price Target

4. NIO Day 2020 Ticket Lottery

5. NIO OS 2.8 Update

6. NIO Power Update: 163-164th Power Swap & 80-82th Power Charger

7. NIO House & Space Update: 191-194th NIO Space

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News

1. NIO November Delivery Number - 5,291

NIO delivered 5,291 vehicles in November 2020, up by 109.3% year-on-year to set a new monthly record. This is NIO's fourth consecutive month of record deliveries and the second consecutive month of over 5,000 deliveries since October.

Source: NIO App

Data released by the company showed that the deliveries consisted of 1,387 ES8s, it 6-seater and 7-seater flagship premium smart electric SUV, 2,386 ES6s, a 5-seater SUV, and 1,518 EC6s, a 5-seater electric coupe SUV.

NIO delivered 36,721 vehicles in 2020 in total, representing an increase of 111.1% year-on-year.

As of November 30, 2020, cumulative deliveries of the ES8, ES6 and EC6 reached 68,634 vehicles, the company said.

NIO said it is in the process of accelerating the production capacity expansion in December 2020 to accommodate the increasing order growth. (News & Photo Source: NIO App)

Here is our comments on this month’s delivery:

NIOtime @theniotime

We intend to release our estimate today but NIO released their delivery number today. 5,291 is the official number, which is below our estimate, 5,568. The production capacity concern to hit Q4 delivery guidance might be one of reasons for today’s back. $nio #nio https://t.co/LCPOJV8g2S

NIO @NIOGlobal

NIO delivered 5,291 vehicles in November 2020, a new monthly record representing a solid 109.3% year-over-year growth. https://t.co/ildrR7ol4K https://t.co/6n5qY3kIGp

This eventually put NIO on pressure to deliver at least 6,154 units in December to hit the lower delivery guidance target (16,500 units). At least in the statement, NIO acknowledged the urgency to push their production in December. We shall see how they can manage this production concern well. So the next month delivery would be critical to watch out for stock movement.

2. NIO and The Bill S.945

The US House of Representatives passed the "Holding Foreign Companies Accountable Act" on December 2, which could prevent some Chinese companies from being listed or traded on US exchanges, Reuters reported on Wednesday.

The bill, which was passed by the US Senate in May, prohibits foreign companies from listing on any US exchange if they fail to pass an audit by the Public Company Accounting Oversight Board (PCAOB) for three consecutive years. The bill could prevent some Chinese companies from listing on US exchanges unless they comply with US auditing standards.

NIO's corporate governance and internal controls ensure the company's compliance with relevant regulations and standards.

While according to Barron’s, a spokeswoman said NIO believes it's in compliance with the new law. NIO's spokeswoman responded to an emailed statement from Barron's saying NIO was aware of the situation and became compliant over the past few months. (News Source: cnTechPost & Barron)

In our opinion, this is likely a political move from United States to keep foreign companies accountable for their accounting practices and protect the investors like you and me from potential financial fraud. The recent Chinese company, Luckin Coffee is one of such bad example for Chinese listing stocks. Last week our reader shared this piece of information and asked us how this could affect NIO in short term.

In near term, this news would likely affect NIO and we already witnessed the major pullback of stocks this week. We believe this is due to the misunderstanding of the Bill as well as the intentional media coverage with negative header to instill fear, uncertainty and doubt (FUD) among the retail investors.

For more information, you may read this article which details the potential consequences of the Bill.

3. GS & UBS Rating on NIO’s Price Target

@theniotime Source: TD Bank

UBS raised the price target of high flying Chinese EV maker NIO from $16.30 to $55.00 to reflect brand premium and maintained its Neutral rating. In a report to investors on Thursday, UBS said it sees NIO valuation as stretched against the bank’s updated intrinsic (DCF) value but fair on a relative basis.

Goldman Sachs analyst Fei Fang raised the bank's price target on NIO to Hold from Sell and raised its price target significantly to $59.00 from $7.70. GS admitted to underestimating the impact of news on NIO's powertrain breakthrough, BaaS battery leasing services, and regulatory incentives.

NIO experienced a 20% downfall despite two price upgrades from two analysts this week. In our opinions, equity analyst rating is never a measure of how stock shall move in short term. We treat equity analyst report as additional reference on why they are giving such ratings, constantly checking the facts and estimates they provided in the report. We would recommend if you are clients of these major banks, you may access to their reports on NIO. Please take a look and think through their lens on wall street lens into the valuation on EV stocks.

4. NIO Day 2020 Ticket Lottery

Source: NIO App

NIO began accepting applications on Thursday for tickets to NIO Day 2020, which will be held on January 9, 2021, at the Wuliangye Chengdu Financial City Performing Arts Center.

NIO Day is NIO's annual owners' gathering, and the company didn't disclose details of the event, but it is expected to unveil its fourth new car, a flagship sedan. 

The sedan, with its name to be determined, could be mass-produced in the fourth quarter of next year or the beginning of 2022 at the JAC NIO plant in central China's Anhui Province, previous media reports said. 

NIO said that due to the limited number of seats available at NIO Day, a lottery will be held on Dec. 10 with different probability intervals based on the applicant's NIO App points. (News: NIO App)

5. NIO OS 2.8 Update

Source: NIO App

NIO on November 30 officially released NIO OS 2.8.0, which will be pushed to ES6, ES8, and EC6 vehicles with current version 2.6.5 and above in batches via FOTA.

Through FOTA, these vehicles will have new functions such as automatic locking for leaving the vehicle, passenger seat memory, and easy entry/exit for the passenger seat.

In addition, NIO OS 2.8.0 will optimize and upgrade network connectivity performance, charging port lighting, and other features.

NIO made its first major software version update back in late October 2018. As of November 30, 2020, NIO OS has pushed out a total of 43 updates covering four models - two generations of the ES8, ES6, and EC6.

Source: NIO App

These updates add 136 new features and 289 optimizations and have undergone a total of 425 evolutions.

With FOTA, NIO can update system-level functions including motor, battery, and electronic control system, chassis suspension, driving assistance, body control, infotainment, etc., and support up to 35 vehicle electronic control units throughout the vehicle. (News Source: cnTechPost & NIO App)

6. NIO Power Update: 163-164th Power Swap & 80-82th Power Charger

So far NIO has two new Power Swap station which sums up to 164 power swap stations and three new Power Charger station which sums up to 82 power charger stations in China. (News Source: NIO App)

NIO Power Swap #163 | Yangtze River Industrial Park, Shanghai

Source: NIO Weibo

NIO Power Swap #164 | Fifth Street Power Swap, Langfang

Source: NIO Weibo

NIO Power Charger #80 | Sand Boat Outlet, Jiangsu Province, Yangzhou

Source: NIO Weibo

NIO Power Charger #81 | Linyi Xiangyu Haosheng, Shandong

Source: NIO Weibo

NIO Power Charger #82 | Suzhou Acker, Jiangsu

Source: NIO Weibo

7. NIO House & Space Update: 191-194th NIO Space

This week NIO has four new NIO Spaces launching this week which sums up to 194 NIO houses and spaces in China. For more photos, please kindly refer to our NIOtime Facebook photo albums here. (News Source: NIO App)

NIO Space #191 | Xiangshan Wanda Plaza, Ningbo

NIO Space #192 | Yuanda Mall, Haikou

NIO Space #193 | Sam Gaoke West Road, Shanghai

NIO Space #194 | Lanzhou Center, Lanzhou

Summary

The main reasons for NIO to pull back about 20% this week are due to many aforementioned events in this weekly commentary. The major reasons we think are that the short-term traders were taking profit near the peak and shifting the fund to Tesla, other hot EV-related SPACs stocks as well as value stocks which are set to bounce on positive vaccine news. Here’s a personal view from Edison Yu, an equity analyst from Deutsche Bank.

Edison Yu @edison__yu

China EV stocks down again this AM $NIO $XPEV $LI - a few thoughts: - valuations got too high so healthy pullback warranted - large algo involvement, fund flow shift to $TSLA ahead of S&P inclusion - flood of EV related equity supply from SPACs - LI follow-on this morning

So what are our takeaways from the 20% stock tumble this week?

Looking at the one-year horizon, NIO has up 1,678% now which clearly outperforms the three major indices. The 20% put a slight dent in the annual stock price growth. Our focus here is not on the stock price, but specifically on the fundamentals including products, services, and brands. If the fundamentals are strong, so does the price of the company. At the moment, we would suggest developing your conviction on NIO by learning about the company itself.

Source: Yahoo Finance

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