As a Chinese manufacturer of electric cars NIO (NIO) (NIO) launched its leasing service, investors did not respond as usual. The buying momentum in Nio stock market also disappeared intraday the day after the company posted strong quarterly delivery numbers. In the long run, Nio shares will have to consolidate, trading in the mid-$ 13 range. But in the medium term, the improving affordability for their EVs could lift months of deliveries to new heights.
Leasing of service
Nine announced the launch of a battery leasing service on August 20th. This causes the company to sell an expensive EV out of the battery pack. With the fall in the price of the cheapest ES6 sports outdoor system, the demand should increase sharply. Without the battery, the ES6 costs 273,600 yuan ($ 39,553). And with the battery, the model costs 343,600 yuan ($ 49,682). The 25% price reduction should drive unit sales by at least that amount, if not more. In the second quarter, Nio delivered 10,331 ES8 and ES6, up 119.8% from last year. Revenue in the second quarter was $ 526.4 million, up 146.5% Y / Y. It also lost RMB1.6 billion, up from $ 164.2 million during the period.
Nine cuts loss by 64% Y / Y and by 26.1% Q / Q. If their sales go up by an extra 25%, it should come close by next four years. The decline in business loss would enable the company to sustain its research and development efforts and increase its marketing activities. It already operates 143 battery exchange stations around China. That said, adding 300 new stations next year should not increase the cost by much. Plus, Nio will be using its existing network. As a result, it will have more satisfied customers and new ones who have the support of a nationwide wide battery network.
Below: Nine ES8
Sales network growth
Nio had 22 Nio houses and 119 Nio spaces in 89 cities in China. The battery replacement service and stations will meet the needs of their customers. Operationally, the company is ready to expand its leasing service. It completed the required certification and is qualified to sell its batteries separately from the cars.
Cautious investors will recall that Nio’s car margins declined due to a voluntary repurchase of battery in the second quarter of 2019. This led to a sharp increase in quality testing that followed, and increased R&D spending. In Q2, R & D costs fell 58.1% Y / Y to $ 77.2 million. Investors should expect costs to continue to fall. For example, SG&A spending also fell in Q2, 34.1% Y / Y to $ 132.6 million. Nio’s improved business efficiency and cost-saving efforts reduced costs.
View
Nine predicts Q3 revenue of between $ 572.9 million and $ 596.2 million. Management may have underestimated the growth going forward. The 8.8% to 13.3% successive revenue increase may not factor in the early launch of the battery network. Still, as EV bookings grow as a result of the price drop, Nio may soon issue a revised outlook.
Nio’s autonomous driving features are currently being rigorously tested. When Intel’s (INTC) file fell sharply after its announcement of CPU delay, markets removed the value of Mobileye. Nine teamed up with Mobileye late last year to develop autonomous EV technology. It is currently on track to launch navigation-on-pilot. With HD Map and Mobileye’s EyeQ5, Nio could soon have fully autonomous (level 5) cars on the road.
Fair price
Wall Street analysts are very bearish on Nio with a $ 10.28 price target (25% downside). The price target range varies widely. The highest price target is $ 18, issued by a Merrill Lynch Analyst (rated 4/5 stars).
Data courtesy of TipRanks
Investors should also note that analysts are collectively bearish on Tesla (TSLA), with an average downside price target of $ 1,295. Still, as TipRanks reports, the latest price target is $ 1400-1,900.
The lack of profitability of Nio earns it an F.
Source: SA Premium
Fortunately, strong revenue growth gives Nio a B + on growth. With the more affordable prices for ES6 and ES8 in China, unit sales will grow. Nine will have an easier time over Tesla over sales in the region.
Nine remains short-term speculation, but a game for long-term growth and buying. Every DIY investor has a rulebook to follow. Here is the rule of claiming corporate profits in a quarter of application. Once this happens, this stock will maintain its uptrend in the coming quarters and trade at new highs.
Por favor [+]Follow me for coverage on deep-discount stocks. Click the “Follow” button next to my name. [X]Check real time to get item alerts.
Find out why our service was one of the fastest growing services on Seeking Alpha in the last month by joining Invest in DIY today. 
Announcement: I / we have no positions in named shares, and no plans to initiate positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I do not receive compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose supply is mentioned in this article.
