J.P. Morgan: Don’t Say Bye Bye to NIO Stock, Say Buy Buy

NIO’s (NIO) Q4 earnings had been disappointing — and (most) investors had been disappointed.

The Chinese language electric-car maker’s inventory sold off by 13% Tuesday, one day after NIO delivered a tiny sales “beat” — nonetheless lost twice as grand cash as analysts had bargained for.

How scandalous used to be the knowledge, precisely? In Q4, NIO reported $1.02 billion in quarterly sales, inching previous analysts’ predicted $1.01 billion. On the underside line, nonetheless, the 17,353 EVs NIO delivered within the fourth quarter of 2020 label the company a GAAP earn lack of $0.16 per allotment, and an “adjusted” lack of $0.14 per allotment — twice the $0.07 educated forma loss Wall Aspect freeway had predicted.

Now now not all of NIO’s info used to be scandalous. NIO grew its sales 133% year over year in Q4, and turned last year’s Q4 bad earnings loss true into a sure bad margin in Q4 2020 — 17.2% for the quarter. Working losses declined by 67%, earn losses by 52%, and “adjusted” earn losses by 53%. And viewed in that context, the quarter used to be vibrant ample to regain a scuttle from funding financial institution JPMorgan no matter the extensive earn loss.

More than staunch a scuttle, in fact. Per JPMorgan analyst Carve Lai, NIO’s Q4 used to be “solid,” and even a “meaningful beat” whereas you back out the “unrealized out of the country replace losses” that had been the first motive NIO lost twice as grand cash as analysts had anticipated. And the losses aside, the truth that NIO guided to greater than 20,000 car deliveries in Q1 2021 (on the least 3% extra than Lai had been banking on) has the analyst feeling “optimistic” about NIO’s “prolonged-term prospects and distinctive alternate mannequin with [autonomous driving] as a carrier.”

As Lai identified, NIO’s associate JAC Motors is expanding production capability to facilitate NIO’s rising sales, aiming so as to regain 150,000 devices every year one a single-shift production mannequin — or twice that with two shifts per day engaged on churning out NIO ES6, ES8, and EC6 vehicles — and the original ET7 electric sedan as well. After seeing how swiftly production ramped in Q4, and NIO’s projections for Q1, the analyst feels confident in predicting that deliveries will extra than double this year, to 90,500 devices or better.

Lai eminent that one bottleneck that can also pause NIO from hitting this aim is the well-publicized deficit in automotive semiconductor chip affords (and yet one more, constrained affords of electric batteries). The analyst sees these reducing production charges to presumably 7,500 devices per month in Q2, nonetheless easing up thereafter.

What kinds of production charges must investors be taking a success upon for, then? Do away with 20,000 devices produced in Q1, and 22,500 in Q2 — that leaves 48,000 autos that NIO will must invent and ship within the second half of the year in insist to hit its year-prolonged production aim. That works out to 8,000 autos per month in Qs 3 and 4, and if NIO can invent 7,500 autos a month with provide chain complications, it appears to be like sensible to resolve it would invent 8,000 a month without them.

Finally, Lai doesn’t seem to skittish in regards to the chance of a sales omit. In lowering his label target on the inventory from $75 to $70 (nonetheless maintaining his Outperform ranking on the inventory), Lai explains that his handiest valid scenario is that inventory dilution has lower the value of NIO shares somewhat. Earnings losses and production dangers seem to disaster him no doubt now not. (To search round for Lai’s song document, click right here)

Reasonably a few analysts allotment a identical notion when it involves NIO. TipRanks data reveals out of 10 analysts, 7 are bullish and 3 are sidelined. With a consensus label target of $68.33, the doable upside is ready 54%. (See NIO inventory evaluation on TipRanks)

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Disclaimer: The opinions expressed listed below are totally those of the featured analyst. The sing material is supposed to be dilapidated for informational applications handiest. It is wanted to invent your beget evaluation forward of organising any funding.

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