Nomura and CMB International Global Markets (CMBIS) downgraded Nio Inc (NYSE:NIO) from Buy ratings to Neutral and Hold ratings, respectively. Nomura cut their 12-month price target on the stock to $7.50 (from $25.80), while CMBIS cut their price target to $8.00 (from $21.00) following the electric automaker’s disappointing 1Q23 earnings miss and delivery numbers.
In the first quarter of 2023, Nio achieved 31,041 deliveries, which fell within the expected range of 31,000-33,000 units. However, the recorded revenue amounted to CNY10.7 billion ($1 = CNY7.1422), slightly below the projected range of CNY10.9B-CNY11.5B.
Nio reported 1Q Gross margin at 1.5%, missing the consensus estimate of 7.3% due to a combination of changes in the product mix and increased promotional discounts for the previous ES8, ES6, and EC6 generations.
Nomura analysts wrote in a note, “We believe the company is on track to improve deliveries in 2H23F, through the ramp-up of ES6 deliveries and the launch of ET5 touring. That said, we expect NIO’s implied upside to be capped by intensified competition and limited market share improvement in 2023F, based on the company’s 2023 guidance for deliveries vs. the overall growth outlook for the EV industry.”
NIO guides for 2Q23 delivery volumes at between 23,000 and 25,000 units, implying an estimated range of 10,000 to 12,000 units to be delivered specifically in June. The company's revenue guidance for the quarter is expected to be within the range of CNY8.7B-CNY9.4B, indicating a better q-q ASP in 2Q23, primarily driven by the contribution of the ES6 model, which is priced between CNY368,000 and CNY426,000.
Management guides for 2Q23 and 3Q23 gross margins to rise to double-digit % and 15%, respectively, which will likely improve cash flows accordingly. However, management now targets to achieve break-even within 4Q24, vs. 4Q23 earlier.
CMBIS analysts in a note, “NIO could face more challenges than its peers when its sales growth slows, amid its heavy investments, including battery swap, chips, mobile phones, etc. We are of the view that its decision making to cut non-core projects is too slow. It now also faces a dilemma between brand positioning and profitability, as it has started to cut service benefits, which could dent its brand image and thus sales more severely than expected.”
Shares of NIO are up 4.53 in premarket trading on Monday.