NIO (NIO) — No Bright Spots

NIO earnings and stock analysis

📢 2023Q2 Financial Results

🏷️ Revenue: $1.21B, -14.8% y/y, -17.8% q/q

💰 Net Loss: $835.1M, +119.6% y/y, +27.8% q/q

🔸 Vehicle Sales: $991M, -24.9% y/y, -22.1% q/q

🔸 Gross Profit: $12M, or 1% of total revenue

🔸 Vehicle Margin: 6.2%, down from 16.7% a year ago

🔸 Cash / Cash Equivalents: $4.3B

🔸 Delivered 20,462 vehicles in July 2023, +103.6% y/y

Investment Thesis

Bullish Opinions

🔸 Based on the discussion during the earnings call, NIO will increase investment in marketing and hire more sales staff, which could lead to sales growth.

🔸 The management is optimistic about the average monthly delivery of 20,000 vehicles in the second half of 2023. Vehicle sales in July exceeded 20,000, a year-on-year increase of 104%. This could be a signal of improving revenue growth trends.

🔸 The stock price returned to around $10 again. NIO’s valuation is relatively low compared to other Chinese EV startups.

Bearish Opinions

🔸 Revenue continues to decline. Although five new models and one facelift have been released in the past few months, sales have not improved much. According to the CEO, all eight models based on the NT2 platform have been released, and the company will not release new models next year. The only new product will be the new non-premium brand ALPS in the second half of 2024. This means that NIO will no longer be able to use new models to stimulate sales.

🔸 Loss increased by nearly 120% year-on-year, reaching nearly 70% of revenue. The vehicle gross profit margin was 6.2%, still below 10%. Although the management expects the gross profit margin to return to double digits in the second half, no evidence shows NIO can reduce costs efficiently.

🔸 The management seems to have lost its focus. They announced they will release an NIO phone by the end of September.

​🔸 The macro environment is not friendly to the auto industry.

🔸 NIO’s ALPS brand will enter the non-premium market, which would face more intense competition.

Conclusion: Sell

Looking at NIO’s financial report for this quarter, there are almost no bright spots. It is not recommended to buy the stock until the management proves that it can reduce costs and increase efficiency.