On Tuesday, Deutsche Bank maintained a Buy rating on shares of electric vehicle manufacturer NIO Inc. (NYSE: NIO), with a steady price target of $9.00. The decision follows NIO's release of its fourth-quarter results, which the bank found to be a mixed performance but accompanied by an optimistic outlook for the first quarter of 2024.
NIO's fourth-quarter deliveries reached 50,045 units, resulting in revenue of 17.1 billion RMB, which exceeded Deutsche Bank and consensus estimates of 16.9 and 16.8 billion RMB, respectively. This revenue beat was attributed to a higher average selling price (ASP). However, the company's gross margin came in at 7.5%, falling short of the anticipated 9.7% by Deutsche Bank and the 10.2% consensus, primarily due to a lower vehicle margin of 11.9% compared to the expected 13.5%.
Operating expenses for NIO in the quarter were reported at 7.9 billion RMB, surpassing forecasts of 7.2 billion RMB. The increase was mainly driven by significant investment in research and development (R&D). Despite these higher costs, NIO's adjusted earnings per share (EPS) of a loss of 2.81 was only slightly below the Deutsche Bank and consensus estimates of a loss of 2.69 and 2.70, respectively. This was partly offset by nearly 980 million RMB in investment income related to the recycling of unrealized gains.
Looking ahead, NIO's management has provided a first-quarter 2024 delivery forecast of 31,000 to 33,000 vehicles, which would generate revenue between 10.5 and 11.1 billion RMB. This outlook is more positive than anticipated, especially considering the substantial monthly rebound expected in March from February's 8,132 units.
Although the implied ASP for the quarter is projected to decrease, management anticipates vehicle margins to be under pressure initially but then recover to 15-18% in the second quarter, driven by increased volume, a shift to model year 2024 vehicles, and cost optimization efforts.
The company also expects R&D expenses to average about 3 billion RMB per quarter throughout 2024, with full-year capital expenditures anticipated to be significantly lower on a year-over-year basis.
InvestingPro Insights
NIO Inc. (NYSE: NIO) continues to navigate the competitive electric vehicle market with a mixture of challenges and strategic optimism. As noted by Deutsche Bank's steadfast Buy rating and a price target of $9.00, the company's performance has been a blend of hits and misses. Yet, several real-time data points from InvestingPro underscore the financial nuances that investors should consider.
InvestingPro Data highlights that NIO holds a market capitalization of $11.09 billion, a testament to its significant presence in the automobile industry. However, the company's Price/Earnings (P/E) ratio is currently negative at -4.07, reflecting the company's lack of profitability in the near term. Additionally, the Gross Profit Margin for the last twelve months as of Q3 2023 stands at a modest 4.47%, indicating room for improvement in operational efficiency.
In line with the company's financial data, InvestingPro Tips reveal that NIO is experiencing high price volatility, with the stock price having taken a considerable hit over the last week. Moreover, analysts have revised their earnings expectations downwards for the upcoming period, which may be a point of concern for potential investors. Nonetheless, it's worth noting that NIO is recognized as a prominent player in the Automobiles industry, an InvestingPro Tip that aligns with the company's ambitious market strategies and Deutsche Bank's positive outlook.
For readers looking to delve deeper into NIO's financial health and future prospects, InvestingPro offers a comprehensive list of additional tips. Currently, there are 17 more InvestingPro Tips available for NIO, which can provide a more nuanced understanding of the company's position and trajectory. To access these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. This could be an invaluable resource for investors aiming to make informed decisions in the dynamic EV market.
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