NIO Inc. (NYSE:NIO) is heading toward the end of its third-quarter effects on Nov. 10 after posting a disappointing update to the October installment.
NIO investors likely suffered a “nervous breakdown” over the past two months, as it fell 63. 1% from its September highs to its October lows. Company BYD (OTCPK:BYDDF).
As a result, NIO unfortunately stood firm on market risk-reduction moves as Chinese President Xi Jinping entered his unprecedented third term with no sign of ending his 0 COVID strategy.
NIO also reported a hit to production at its Hefei plants, disruptions in its speed in the fourth quarter.
On its previous earnings call, NIO had telegraphed its confidence that the fourth quarter would be a record quarter. But the recent disruption in production and disappointing deliveries in October likely dashed investors’ hopes for a record fourth quarter.
The question for investors is whether the sharp sell-off over the past two months has reflected those significant challenges, allowing NIO to build constructively on existing levels.
Why the market likely reflected NIO’s worst short-term valuation challenges, in line with its former valuation lows last noted in 2019. Therefore, investors waiting to push the cause forward deserve to locate those securities suitable for speculation. natural electric vehicle brands in China.
However, we know that the buying momentum has not yet returned decisively to NIO, even if the sales decline has likely eased significantly. As a result, NIO is expected to be in a narrow zone as it consolidates towards its third-quarter earnings.
We have our speculative buying, but we lowered our medium-term value target to $18 (implying a bullish outlook of 86%).
NIO deliveries consistent with the month (company records)
NIO released October installments of 10. 06K, adding 1. 03K ET5. As a result, October’s momentum weakened particularly in September, with deliveries falling 7. 5% month-on-month.
As a result, the tension to deliver in November and December intensified to succeed in a record quarter. As such, we don’t expect NIO to return to its past optimism (as noted above), given that COVID lockdowns are once again disrupting its production and deliveries.
Therefore, until the 0 COVID scenario is resolved, Chinese stocks will most likely continue to enjoy similar super volatility to those lockdowns.
Consensus estimates of changes in NIO revenue and adjusted EBIT margins (S)
As a result, consensus (bullish) estimates for the fourth quarter are at risk, depending on the extent of the disruption. Accordingly, we encourage investors to thoroughly analyze management’s direction for their next call for benefits to assess the significance of the damages.
But we do not expect structural adjustments in the rate of NIO production, there may simply be unforeseen disruptions in the future. The bigger question is whether NIO expects its path to profitability to be delayed much longer.
But we think the market has likely reflected those demanding situations, as NIO trades at near-record valuations.
NIO NTM (koyfin) Multiple Revenue Valuation Trend
As discussed above, the sharp devaluation over the past two months has pushed NIO to its lowest valuation levels, last noticed in 2019. As such, NIO last traded at an NTM income of 1. 22x.
NIO Forward consensus estimates of multiples (S)
However, this means that the market has set NIO’s value at a profit multiple for FY25 of just 0. 53x. Even if we take into account the short-term impact on its earnings cadence in the fourth quarter, it’s all too reasonable. to forget about a high-growth game with a path to profitability.
NIO Price Chart (Weekly) (TradingView)
What happens is that NIO’s stock of value seems to fit into its well-beaten valuation, indicating a short-term consolidation.
The sell-off of its September highs is emblematic of a large capitulation move to instill significant concern and concern. The removal of minimums in March and May also forced early rear anglers to throw in the towel, as it removed their loss limits.
Therefore, we believe that this “liquidation” event has likely particularly reduced the risks of NIO access levels. However, we will have to emphasize that we have not yet obtained sustained purchase aid that can revive its momentum, such as in March/May.
Therefore, the option of additional downward volatility in the short term is ruled out. But the risk-reward profile seems horny at those levels.
Maintain the speculative rating.
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This article written by
I am a JR, senior and founder of JR Research and the Ultimate Growth Investing Marketplace service. Our team is committed to providing more clarity to investors in their investment decisions.
Our market service focuses on an action-based approach to valuing expansion and generation stocks, supported by a basic analysis. In addition, our general SA online page deals with the movements of sectors and industries.
Our discussion basically focuses on a thesis in the short or medium term. While we hold long-term stocks, we also take advantage of the right opportunities to take advantage of short- and medium-term fluctuations, taking advantage of long (directionally bullish) or short (directionally bearish configurations) stocks.
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Disclosure: I have/have a long advantageous position in NIO shares, whether through ownership of stocks, features or other derivatives. I wrote this article myself and it expresses my own opinions. I don’t get any refunds for this (other than Seeking Alpha). I have nothing to do with a company whose actions are analyzed in this article.