Will the relaxation of Covid rules reduce the risks for Chinese electric vehicle manufacturer NIO?
China-based electric vehicle maker NIO (NYSE: NIO) rose more than 19% on Wednesday. The shares were trading at $12.51 with one hour remaining in the session.
MarketBeat.com - MarketBeatNIO, along with other Chinese EV makers, rose in tandem with XPeng (NYSE: XPEV), which saw a loss of 0 $.36 in the third quarter, meeting views. Revenue of $959.2 million was below analysts' expectations.
As always, investors are looking to the future, and they are now optimistic about the ability of these companies to increase production and introduce new models. XPeng's forecast for deliveries in the current quarter was better than expected.
Also, the Chinese government may soften its stance on Covid lockdowns amid protests. This could bode well for an increase in factory production.
A government official said this week that the country has “reviewed and adjusted our pandemic containment measures to protect the interests of the people as much as possible and limit the impact on people as much as possible”.
p>Although markets rose on Wednesday mainly on news that the US Federal Reserve may soon begin to slow interest rate hikes, news specific to China likely played a role in the rise in stocks from this country.
Other Chinese electric vehicle makers Li Auto (NASDAQ:LI) and BYD (OTCMKTS:BYDDF) also saw strong price increases on Wednesday.
This potentially good news came as the broader market surged on the first bullish day of trading since Nov. 23.
Slower revenue growthNIO, which went public in 2018, is not yet profitable. The company's three-year revenue growth rate is a very healthy 103%, but that high figure hides a problem: the pace of growth has dropped sharply.
During the end of 2020 and the first three quarters of 2021, NIO grew its revenue at triple-digit rates. In the quarter that ended March 2021, revenue grew 529%.
However, growth rates over the past four quarters ranged from 53% to 20% most recently. It's still very good, but well below the scorching levels of 2020 and 2021.
NIO isn't the only China-based electric vehicle maker to have seen revenue growth slow dramatically. XPeng recorded triple-digit sales growth in 2020 and throughout 2021. Over the past four quarters, growth has slowed from 208% to 8% most recently.
NIO acknowledged the slowdowns in its latest earnings report. The loss in the last quarter was $0.30 per share, the largest in two years, and equaled the loss for all of 2021.
For the full year, analysts expect NIO to lose $0.89 per share. For next year, Wall Street sees a loss of $0.56 per share.
There have clearly been issues simmering for several quarters, before the latest round of Covid lockdowns in China. But while the rest of the world has found ways to essentially live with Covid, China is retaining stricter policies that have the potential to slow production at factories at any time.
This is where concerns about the future value of NIO become relevant.
Increase in R&D spending, salesIn its most recent report, NIO said it has increased research and development spending and is looking to add new products to the pipeline. The company also said selling, general and administrative expenses were up, primarily due to the build-out of the sales team.
These two additional line items indicate expansion plans, which could be impacted if fewer cars roll off the assembly line.
Meanwhile, rival Chinese electric vehicle maker BYD has been actively expanding into overseas markets.
BYD has been profitable for the past few years, with the exception of 2020. However, unlike startups created to produce electric vehicles, BYD is an established company that manufactures buses, trucks, bicycles, forklifts, batteries and other cars.
NIO, on the other hand, has a certain glamorous appeal as a company set up to produce electric vehicles and related products, such as battery charging stations. NIO maintained its luxury position...
China-based electric vehicle maker NIO (NYSE: NIO) rose more than 19% on Wednesday. The shares were trading at $12.51 with one hour remaining in the session.
MarketBeat.com - MarketBeatNIO, along with other Chinese EV makers, rose in tandem with XPeng (NYSE: XPEV), which saw a loss of 0 $.36 in the third quarter, meeting views. Revenue of $959.2 million was below analysts' expectations.
As always, investors are looking to the future, and they are now optimistic about the ability of these companies to increase production and introduce new models. XPeng's forecast for deliveries in the current quarter was better than expected.
Also, the Chinese government may soften its stance on Covid lockdowns amid protests. This could bode well for an increase in factory production.
A government official said this week that the country has “reviewed and adjusted our pandemic containment measures to protect the interests of the people as much as possible and limit the impact on people as much as possible”.
p>Although markets rose on Wednesday mainly on news that the US Federal Reserve may soon begin to slow interest rate hikes, news specific to China likely played a role in the rise in stocks from this country.
Other Chinese electric vehicle makers Li Auto (NASDAQ:LI) and BYD (OTCMKTS:BYDDF) also saw strong price increases on Wednesday.
This potentially good news came as the broader market surged on the first bullish day of trading since Nov. 23.
Slower revenue growthNIO, which went public in 2018, is not yet profitable. The company's three-year revenue growth rate is a very healthy 103%, but that high figure hides a problem: the pace of growth has dropped sharply.
During the end of 2020 and the first three quarters of 2021, NIO grew its revenue at triple-digit rates. In the quarter that ended March 2021, revenue grew 529%.
However, growth rates over the past four quarters ranged from 53% to 20% most recently. It's still very good, but well below the scorching levels of 2020 and 2021.
NIO isn't the only China-based electric vehicle maker to have seen revenue growth slow dramatically. XPeng recorded triple-digit sales growth in 2020 and throughout 2021. Over the past four quarters, growth has slowed from 208% to 8% most recently.
NIO acknowledged the slowdowns in its latest earnings report. The loss in the last quarter was $0.30 per share, the largest in two years, and equaled the loss for all of 2021.
For the full year, analysts expect NIO to lose $0.89 per share. For next year, Wall Street sees a loss of $0.56 per share.
There have clearly been issues simmering for several quarters, before the latest round of Covid lockdowns in China. But while the rest of the world has found ways to essentially live with Covid, China is retaining stricter policies that have the potential to slow production at factories at any time.
This is where concerns about the future value of NIO become relevant.
Increase in R&D spending, salesIn its most recent report, NIO said it has increased research and development spending and is looking to add new products to the pipeline. The company also said selling, general and administrative expenses were up, primarily due to the build-out of the sales team.
These two additional line items indicate expansion plans, which could be impacted if fewer cars roll off the assembly line.
Meanwhile, rival Chinese electric vehicle maker BYD has been actively expanding into overseas markets.
BYD has been profitable for the past few years, with the exception of 2020. However, unlike startups created to produce electric vehicles, BYD is an established company that manufactures buses, trucks, bicycles, forklifts, batteries and other cars.
NIO, on the other hand, has a certain glamorous appeal as a company set up to produce electric vehicles and related products, such as battery charging stations. NIO maintained its luxury position...
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