Why This Nio Analyst Expects Net Loss to Widen In 2021-22

Following Nio Inc - ADR's NIO strong quarterly results, an analyst at BofA Securities retained his bullish bias on the electric vehicle maker.

The Nio Analyst: Analyst Ming Hsun Lee reiterated a Buy rating and $62 price target on Nio shares.

The Nio Thesis: Nio's second-quarter revenues climbed 127% year-over-year to RMB$8.4 billion and vehicle deliveries climbed 112% to 22,000 units, analyst Hsun Lee said in a note.

Gross margins fell 0.8 points quarter-over-quarter and vehicle margin slipped 0.9 points, attributable to a larger decline in ASP on more sales contribution from ES6, the analyst noted.

The net loss for the quarter narrowed due to higher sales and smaller-than-expected R&D, the analyst added.

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Despite supply chain challenges, Nio expects to deliver 23,000 to 25,000 vehicles in the third quarter, representing 5-14% sequential growth, Hsun Lee said. The company expects to accelerate R&D spending for a new model and autonomous driving development, the analyst added.

Nio plans to deliver three new models, including the ET7 sedan, in 2022, and these will be based on its NT2.0 platform, the analyst noted.

See also: How to Buy Nio Stock

BofA raised its sales volume forecast for the periods 2021, 2022 and 2023 by 3%, 5% and 12%, respectively.

Nio plans to accelerate depreciation and amortization costs on shortened D&A period for its NT 1.0 platform, Hsun Lee noted.

"Since NIO will adopt a stricter D&A method and spend more OPEX to support brand expansion, we expect to see net loss widen in 2021-22," the analyst said.

The price target for Nio remains unchanged despite the increase in volume forecasts, as BofA expects new share issuance to employees.

NIO Price Action: At last check Thursday, Nio shares were down 3.76% to $42.29.

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