By Senad Karaahmetovic
One of the three prominent electric vehicle (EV) startups from China, Nio (NYSE:NIO), is due to report earnings next Wednesday.
Heading into the print, a Deutsche Bank analyst cut the price target to $39 from $45 to reflect lower sales estimates. The analyst expects Nio to report a “mostly in-line quarter” while investors will be mostly focused on the 2H outlook amid last week’s disappointing guide from Xpeng (NYSE:XPEV).
“By the time NIO reports, management will only need to guide for 1 month in 3Q (DBe at 30,500 units) and our sense is investors are generally already prepared for soft near-term sales and management just needs to show that demand for existing models is not totally falling apart and the casting parts bottleneck will be resolved soon,” he wrote to clients in a research note.
The analyst believes that “consensus estimates for 3Q/4Q clearly need to come down,” but more positively, it is likely that this quarter will prove to be the “last reset before the product supercycle hits full stride.”
“NIO is on track to move further into Europe with management confirming a separate NIO Day in Europe next quarter which could help sentiment,” he added.
Net-net, NIO stock is still a top China EV pick at Deutsche Bank as “the company's efforts around battery swapping, user experience, and internal battery cell development go very much underappreciated and will eventually show clear differentiation as the local Chinese market gets increasingly more competitive.”
Nio shares are down almost 2% in premarket Monday.