Can NIO Stock Rise after Its Q4 Earnings Release?

• NIO, the Chinese electric vehicle maker, will likely release its fourth-quarter earnings on Wednesday. The stock has fallen in line with broader markets this year and based on Monday’s closing prices. So far, the stock has fallen almost 27% this year.
• NIO stock soared after its third-quarter earnings beat. We’ll discuss analysts’ predictions for NIO’s fourth-quarter earnings and how the stock could react after the earnings.

NIO stock (NYSE:NIO) has fallen almost 27% this year. Tesla (NASDAQ:TSLA) has also pared nearly all of its 2020 returns. So far, Tesla stock has only risen 6.4% year-to-date. NIO will likely release its fourth-quarter earnings on Wednesday. The analysts polled by Thomson Reuters expect the company to report revenues of 2.84 billion Chinese renminbi ($404 million) in the fourth quarter—a sequential rise of almost 55%. However, NIO’s fourth-quarter revenues will likely fall by 17.5% YoY (year-over-year). The company’s net losses will likely narrow from 2.45 billion Chinese renminbi ($349 million) in the third quarter to 2.24 billion Chinese renminbi ($319 million) in the fourth quarter. Tesla posted a net profit in the third and fourth quarter of 2019. However, the company has only posted a net profit in six quarters since it went public.

NIO delivered 8,244 electric cars in the fourth quarter of 2019 compared to 7,980 vehicles in the fourth quarter of 2018. The company’s deliveries in the fourth quarter of 2019 were better than expected. Meanwhile, NIO’s deliveries have fallen this year due to the coronavirus spreading in China. The country’s overall car sales, both internal combustion and electric cars, fell in January and February. The coronavirus scare had a negative impact on NIO stock this year.

In addition to the revenues and EPS, investors should pay attention to NIO’s cash burn. The company has been burning a lot of cash. Last year, the company said that it would face a survival crisis. Meanwhile, NIO has won the survival battle for now. The company has raised capital by issuing convertible notes. Last month, NIO announced a preliminary agreement with the municipal government of Hefei. According to the terms, NIO would get $1.43 billion. During the fourth-quarter earnings call, management might provide some more details about the agreement.

During the fourth-quarter earnings call, investors will watch management’s views on its financial position. Notably, NIO stock fell after it announced a capital raise. In contrast, Tesla stock soared after it announced its equity issuance last month. Investors will also follow NIO’s fourth-quarter earnings call for a first-hand review of China’s automotive market amid the coronavirus slowdown. Last month, China’s car sales fell almost 80% YoY. Analysts might also question NIO’s management about the competition from Tesla. Tesla’s China Gigafactory has started delivering the China-made Model 3 to customers. Despite the electric vehicle frenzy, Tesla and NIO stock have fallen sharply this month amid the broader market sell-off.

NIO stock soared after its third-quarter earnings beat. During the fourth-quarter earnings call, management might want to brief investors about its plans, especially on sustainability. If the company provides a convincing and optimistic outlook, NIO stock might stage a comeback.