Is Nio a buy?

Electric vehicle technology has come to the forefront in recent years. Here is the breakdown of $NIO, better known as NIO.


Current Price: $41.06

52/Wk High: $43.30

52/Wk Low: $1.66


Market Cap: $56.2 billion


Read below for the breakdown!


Nio is a newer Chinese auto name in which designs, manufactures, and sells electric vehicles. Not only that but Nio is also involved in charging solutions and autonomous driving technology.


The electric vehicle market is taking the world by storm and Nio has gone on a huge run this year, running from a 2019 low of $1.66/share to a whopping $43.30/share.


Digging into the company’s most recent quarter, Q2, Nio delivered a solid beat. Nio reported a Q2 EPS of CNY $-1.08 versus the expected consensus EPS of CNY $-1.84.


Furthermore, Nio also delivered on revenues, reporting $526.4 million in revenue for Q2, representing 146.5% year-over-year growth. Not only that but deliveries also significantly increased.


Nio reported a total of 10,331 deliveries between both the ES8 and ES6 models. While deliveries grew, sales did as well, with Q2 vehicle sales totaling $493.4 million, representing 146.5% growth year-over-year.


Finally, it is important to note that gross profit increased to $44.3 million versus the 2019 gross profit level of $-504.2 million RMB. On the otherhand, Nio continued to run a loss, reporting a Q2 net loss of $-166.5 million.


When it comes to guidance, Nio expects deliveries to be within a range of 11,000 to 11,500, representing 129.2% to 139.6% growth in Q3.


Nio management also expects Q3 revenues of $572.9 million to $596.2 million, representing growth of 120.4% to 129.3%.


Shifting into the balance sheet, the numbers are not bad but could be better.


Total Debt: $11.428 billion Yuan


Total Liabilities: $28.946 billion Yuan


Total Assets: $23.151 billion Yuan


Cash & Short Term Inv: $10.726 billion Yuan


In general, the liabilities to assets ratio is worrying and low cash to debt is troubling. On the bright side, Total Assets did increase significantly and seems to be increasing rapidly.


On the valuation side of things, Nio continues to trade at overvalued numbers. Currently, Nio is trading at a price to sales ratio of 31.06x, but if a long term strategy is taken, Nio is not terribly expensive yet.


Given the numbers, the analysts are quite bearish. Currently, the mean price target is $25.71/share, representing a -40.01% loss.


Nio’s high price target on the otherhand is $46.60/share, representing an 8.73% gain, while the low price target is $7.70/share, representing a -82.03% loss.

The big money is also quite underinvested in Nio. Currently, 35.31% of Nio is owned by institutions. Top holders include Baillie Gifford $ Co., BlackRock Institutional Trust, and The Vanguard Group.


Taking a look at the technicals Nio has run bigtime on the year, and waiting for a pullback could be preferable. Currently, the six-month MACD is running with upward momentum within a range of 4.59 down to 3.37.


The six-month charts are also implying an RSI of 70.43 and CCI of 188.55, creating a majorly overbought situation on a technical basis. It is also important to note that Nio trades roughly two points from its highs.


Overall, Nio looks to have great potential but still has a lot to prove. The balance sheet continues to be a worry but if growth continues in the long term the balance sheet should get cleaned up.


In short, wait on Nio until the stock itself cools off. At the end of the day, it has simply run too far on not enough positivity. If a pullback arises I like the stock long.


EAT - SLEEP - PROFIT


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.


Image: Sourced from the NIO Newsroom website.