By Michael Elkins
Barclays downgraded Nio Inc. (NYSE:NIO) to an Equal Weight rating (from Overweight) and cut the price target on the stock to $10.00 (from $18.00) following the electric vehicle maker’s 4Q earnings report.
NIO reported total 4Q revenue of RMB 16.1 billion (RMB 1 = $0.14). Up 62.2% yoy, but 10.2% lower than Barclay’s estimate. Vehicle sales revenue was RMB 14.8B, 12.1% lower than estimated, due to lower-than-expected vehicle deliveries during the quarter. NIO delivered 40,052 units in 4Q22, only slightly above the lowered management deliveries guidance of 38,500 to 39,500 units (originally 43k to 48k).
The company reported gross profit of RMB 621.8 million, 76.6% lower than estimates, with a gross margin of 3.9%, 11 percentage points lower than expected. During the quarter, gross profit/margin was negatively impacted by recognition of inventory provisions, accelerated depreciation on production facilities, and losses on purchase commitments for the existing generation of ES8, ES6, and EC6, as NIO enters into a product upgrade cycle.
Analysts wrote in a note, “4Q revenue was as anticipated since vehicle deliveries had previously been announced. But much higher-than-expected opex and lower-than-expected gross margins were surprises. While lower-than-expected GM was partially attributed to inventory write-offs or cancellation of purchase commitments for parts for the older and now phased-out models, the miss reflects the challenges NIO is still facing in optimizing its industrial planning and operations. With several new models to be launched this year (success of these new models is not guaranteed of course), roll out of a potential new sub brand, aggressive expansion in the European markets, and continued build out of battery swapping stations (adding 1,000 new stations in China plus more overseas) in 2023, we don’t believe the large spending at NIO will slow down anytime soon. With heightened risks from such spending and uncertain fate of newer models, as well as intensified competition in China’s EV industry in general, we are stepping aside while waiting for more clarity on transition progress.”
Shares of NIO are down 3.62% in pre-market trading on Thursday.