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Bernstein maintains NIO at Market Perform with $5.50 target

EditorBrando Bricchi
Published 06/07/2024, 01:05 PM
©  Reuters

On Friday, Bernstein SocGen Group maintained its Market Perform rating on shares of electric vehicle manufacturer NIO Inc (NYSE:NIO), with a steady price target of $5.50. The rating follows NIO's first-quarter earnings report, which fell short of expectations, with a revenue decline of 7.2% year-over-year (YoY) and 42.1% quarter-over-quarter (QoQ) to RMB 9.9 billion. The drop in revenue was attributed to a decrease in vehicle deliveries, which totaled 30,100 units, marking a 3.2% decline YoY and a 39.9% reduction QoQ.

The company's gross margin stood at 4.9%, aligning with market projections. However, the vehicle margin showed improvement from the first quarter of 2023, rising to 9.2% from 5.1%, thanks to lower battery costs. Despite this, the vehicle margin saw a downturn from the 11.9% recorded in the fourth quarter of 2023, affected by increased promotional activities and a shift in product mix towards more ET5/T models.

NIO's total operating expenses saw a slight increase YoY to RMB 10.6 billion, driven by the expansion of sales personnel and intensified marketing efforts. Consequently, the company's earnings before interest and taxes (EBIT) loss widened to RMB 5.4 billion, resulting in an EBIT margin of -54.4%, compared to -47.9% in the first quarter of 2023 and -38.7% in the fourth quarter of 2023.

The net loss reported by NIO amounted to RMB 5.2 billion, leading to a net margin of -52.3%. This represents a further decline when compared to the net margins of -44.4% in the first quarter of 2023 and -31.4% in the final quarter of the previous year. The financial figures reflect the challenges faced by the electric vehicle sector and NIO's performance amidst market dynamics.

In other recent news, NIO Inc. reported a 7.2% year-over-year decrease in its first-quarter earnings for 2024, with revenues totaling RMB 9.9 billion. This decline was attributed to a lower average selling price as the company worked to clear out its inventory of 2023 model vehicles. Despite the revenue dip, NIO's overall gross profit margin improved to 4.9%, surpassing the anticipated 3.2%. BofA Securities updated its outlook on NIO shares, increasing the price target to $6.00 from the previous $5.90, maintaining a neutral rating.

In addition to these financial developments, NIO launched a new brand, ONVO, targeting the mainstream family market. Preorders for ONVO's first product, the L60 smart electric mid-sized SUV, are already underway. NIO's subsidiary, NIO Power, secured a strategic investment of RMB 1.5 billion and currently provides over 45 million power swaps globally through its network of 2,472 power swap stations.

These recent developments highlight NIO's strategic expansion into different market segments and its continued investment in NIO Power. Despite the challenges faced in Q1 2024, the company's outlook remains optimistic with the anticipation of improved vehicle margins and steady increases in vehicle volume.

InvestingPro Insights

In light of Bernstein SocGen Group's maintained Market Perform rating on NIO Inc, it's worthwhile to consider additional insights from InvestingPro. With a market capitalization of $10.16 billion, NIO is a significant player in the electric vehicle space. Despite recent challenges, two analysts have revised their earnings upwards for the upcoming period, suggesting a potential shift in market sentiment. Moreover, NIO's cash position is stronger than its debt levels, providing some financial stability.

InvestingPro Tips highlight that NIO is quickly burning through cash and has weak gross profit margins, with a gross profit margin of only 6.16% over the last twelve months as of Q1 2024. Additionally, the stock has experienced a notable decline over the past week, month, and six months, with a 1-week price total return of -8.91% and a 6-month price total return of -34.45%. Analysts are not expecting the company to be profitable this year, which is consistent with an adjusted P/E ratio of -3.42, indicating the market's anticipation of future losses.

For readers interested in a deeper analysis, InvestingPro offers additional tips on NIO, which could provide more context on the company's valuation and future prospects. To access these insights and more, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are currently 10 additional InvestingPro Tips available for NIO, which could help investors make more informed decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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