BofA: Nio Faces 'Weak' Orders, Stiff Competition, High Refinancing Risk

Chinese electric vehicle maker Nio Inc - ADR NIO traded lower Monday after the company reported disappointing July shipment numbers.

Nio shares are now down 58.8% in the past six months, but Bank of America Merrill Lynch said Monday that it’s still not time for investors to buy the dip.

The Analyst

Ming Hsun Lee reiterated an Underperform rating on Nio with a $3 price target.

The Thesis

Nio reported just 837 vehicle deliveries in July, down 38% from June. As of the end of July, NIO has delivered a year-to-date total of 8,379 vehicles, about 31% of Lee’s full-year projection of 27,500 vehicles.

Nio said the weak July was due to a recall event that negatively impacted battery capacity, a subsidy cut in late June and a weak macro environment in China as the trade war drags on.

“We have an Underperform rating on NIO, given: (1) we expect ES8/ES6 orders to be weak, (2) competition in EV is intensified, (3) high refinancing risk due to weak FCF,” the analyst said. 

Bank of America is forecasting 11.26 billion yuan ($1.59 billion) in Nio revenue in 2019, up 127% from a year ago.

The sell-side firm expects a full-year net income loss of 10.91 billion yuan this year.

While net income losses should peak in 2020, Nio is likely to remain heavily in the red through at least 2021, Lee said. 

Price Action

Nio shares were trading down more than 3% at $3.04 shortly before the close Monday. 

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Photo courtesy of Nio.