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What Justifies NIO Stock Gains despite Q3 Revenue Miss?

Jitendra Parashar - Author
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Nov. 6 2018, Updated 9:41 a.m. ET

NIO’s Q3 2018 earnings

Chinese electric carmaker NIO (NIO) released its third-quarter earnings on November 6 before the market opened. The company’s net loss widened to about 2,370 Chinese yuan (or $1.51) per share in the third quarter compared to 1,724 Chinese yuan in the second quarter. Nonetheless, this was better than Wall Street analysts’ consensus estimates of an adjusted net loss of 2,696 Chinese yuan for the third quarter. Let’s take a quick look at some other key highlights of the company’s third-quarter earnings.

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Revenue missed estimates

In the third quarter, NIO’s total revenue stood at about 1,470 million Chinese yuan, or $214.0 million, as compared to just 46.0 million Chinese yuan in the second quarter. On the negative side, the company’s third-quarter revenue missed analysts’ consensus estimates of 1,589 Chinese yuan.

In the third quarter, NIO produced 4,206 units and delivered about 3,268 units of its ES8. The ES8 is an SUV like Tesla’s (TSLA) Model X. It’s important to note that NIO launched the car model ES8, its “first volume manufactured” EV, in December 2017 and began deliveries on June 28.

What justifies stock rally?

As in the case of Tesla, NIO investors might remain more focused on its future growth potential rather than its financials. In the fourth quarter, NIO expects its vehicle deliveries (XLY) to be between 6,700 units and 7,000 units, reflecting the possibility of positive sequential delivery growth of about 105% to 114%. In addition, the company also expects to launch its five-seater premium SUV by the end of 2018.

At this point, it’s futile for investors to look at NIO’s sequential revenue, vehicle deliveries, and production growth, as its second-quarter data only consists of three days from June 28 to June 30, 2018. However, investors’ high expectations from the company’s positive 2018 outlook and its future growth plans could be the primary reason why its stock rallied in the pre-market session on November 6. Today at 8:45 AM, NIO stock was up 11.1% in the pre-market session from the previous session’s closing.

In November so far, NIO has gone up by 13.2% as of November 5. Tesla has gone up by 1.2% month-to-date, while other Chinese companies like Alibaba (BABA) and Baidu (BIDU) have risen 1.7% and 0.3% month-to-date, respectively.

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