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Analyzing NIO Stock before Its Q1 Earnings Release

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  • NIO stock has fallen 8.2% for the year. The company will likely release its first-quarter earnings on May 28. Usually, the stock is very volatile after its earnings release.
  • The stock fell 16% on March 18 after its fourth-quarter earnings missed the estimates. However, the stock had jumped almost 45% on December 30 after its third-quarter earnings release. So, what should investors expect from NIO’s earnings release for the first quarter of 2020?
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NIO stock

So far, NIO (NYSE:NIO) stock has fallen 8.2% in 2020. The stock fell after its fourth-quarter earnings missed analysts’ expectations. However, the stock surged after the announcement of an agreement with the Hefei Municipal government. The agreement and the issuance of convertible notes helped the company raise cash. Now, NIO will likely release its first-quarter earnings on May 28. Before we see what analysts project for the company’s first-quarter earnings, let’s see how the stock fared after recent earnings releases.

NIO stock fell after its Q4 earnings release

NIO stock fell 16% on March 16 after its fourth-quarter loss was wider than expected. However, the company’s revenues were better than expected. In regulatory filings, NIO raised doubts about going bankrupt. NIO’s cash burn has been a concern. However, the recent capital raises would help the company address the cash burn in the short to medium term. In the long term, the company would still need to be a sustainable business.

Meanwhile, NIO stock jumped 45% after its third-quarter earnings beat the expectations. Last year, markets got a little too pessimistic on the company. The third-quarter earnings beat helped boost the stock to more normalized levels.

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Analysts’ earnings estimates

The analysts polled by Thomson Reuters expect NIO to report revenues of 1.67 billion Chinese renminbi ($235 million) in the first quarter—a sequential decline of more than 41%. Fewer deliveries will likely drive the company’s revenues lower in the quarter. NIO only delivered 3,848 electric vehicles in the first quarter—down 53% from the 8,244 deliveries in the sequential quarter. Analysts expect NIO’s net loss to narrow to 2.0 billion Chinese renminbi ($288 million) in the first quarter compared to 2.8 billion Chinese renminbi ($396 million) in the sequential quarter.

Overall, analysts are bearish on NIO stock. The stock’s mean consensus target price implies a potential upside of 8.1%.

Q1 earnings release

NIO has taken a lot of steps to address its massive losses. The company has also laid off some of its employees to control costs. During the fourth-quarter earnings call, the company said that it expects its first-quarter net loss to narrow about 35%  compared to the fourth quarter. NIO also sounded positive on the gross margins. The company expects vehicle gross profit margins to turn positive in the second quarter. Read Tesla or NIO: Which Is a Better Stock to Buy? to learn more.

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