Nio Reports Q3 Beat Despite Supply Challenges, Below-Consensus Q4 Guidance And Confirms Launch Of 3 New Models In 2022

Chinese electric vehicle startup Nio, Inc. NIO reported forecast-beating third-quarter results, boosted by record vehicle deliveries and non-vehicle revenues, including regulatory credits. Vehicle margins eased from the previous quarter.

The company expressed confidence in addressing supply chain challenges in the fourth quarter and said it is on track to launch three new models in 2022.

Nio's Key Q3 Metrics: Nio reported a non-GAAP loss per share of 6 cents, narrower than the consensus loss estimate of 9 cents per share.

The bottom-line number also improved from the previous quarter's loss of 11 cents per share.

Revenues came in at $1.522 billion compared to the consensus estimate of $1.46 billion. This represented a 118.7% increase from year-ago revenues of $696.03 million. In the second quarter, the company reported revenues of $1.3084 billion.

The company had earlier guided to revenues of $1.3804 billion to $1.4917 billion.

Vehicle sales, accounting for 88% of the total revenues, climbed 102.4% to $1.340 billion. Other sales jumped 350.8% to $181.4 million, reflecting sales of automotive regulatory credits and battery upgrade service, as well as other revenues.

Nio delivered a record 24,439 vehicles during the third quarter compared to 21,896 vehicles in the second quarter.

Gross margin was at 20.3%, higher than 12.9% in the year-ago quarter and 18.6% in the previous quarter. Vehicle margin came in at 18%, increasing from 14.5% in the year-ago quarter, but declining from 20.3% in the previous quarter.

Nio ended the third quarter with cash, cash equivalents, restricted cash and short-term investment of $7.3 billion. In early September, the company announced an at-the-market equity offering of $2 billion ADSs, each representing one Class A common stock.

"Our demand continues to be strong and our new orders reached a new record high in October," said William Bin Li, founder, chairman and chief executive officer of Nio.

Related Link: Nio Vs. XPeng Vs. Li Auto: How October EV Deliveries Stack Up

Chip Shortage Hurts Sales: Nio's deliveries more than doubled year-over-year to 7.931 vehicles July before dipping to 5,880 vehicles in August, with the company attributing the softness to supply chain disruptions. Nio also trimmed its deliveries forecast for the quarter from a range of 23,000-25,000 units to a range of 22,500-23,500 units.

The company came back up with a bang in September and delivered 10,628 vehicles, representing a 125.7% year-over-year increase. Things have soured since then. Earlier this month, the company reported a plunge in monthly deliveries to 3,667 vehicles for October, down 27.5% year-over-year and a steeper 65.5% from the previous month.

Nio's Guidance: The company guided fourth-quarter deliveries to increase 35.4%-46.9% to 23,500-25,500 units. This guidance range implied a change of a 3.8% drop to a 4.3% increase.

The company expects revenues to come in at $1.455 billion to $1.5684 billion, up 41.2%-52.2%. Analysts, on average, estimate the company to report a profit of 1 cent per share on revenues of $1.74 billion.

Despite the continued supply chain volatilities, Nio is working closely together to secure the supply and production for the fourth quarter, CEO Li said in a statement.

"Meanwhile, we are fully dedicated to accelerating our products and technologies development and bringing the three new products based on NIO Technology Platform 2.0 to users in 2022 to lead the smart EV transformation and adoption," Li said.

Focus For Earnings Call: On the earnings call, Nio is expected to shed light on how its Norwegian expansion is coming along. The company has already begun delivering its ES8s in the country.

Investors may be keen to know whether the company is contemplating expansion into other European countries, especially Germany and the U.K.

Timeline for Hong Kong listing, Nio Day 2021 announcements, ET7 launch schedule could also be of interest to investors.

Nio Stock Is Stuck: Nio shares have underperformed EV giant Tesla, Inc. TSLA, with which it competes in the Chinese market.

Year-to-date, Nio is down about 12%, while Tesla is up about 65%. In comparison, domestic peers XPeng, Inc. XPEV and Li Auto, Inc. LI are up 10% and 8.7%, respectively.

Deutsche Bank analyst Edison Yu said in a recent note he expects two-three upcoming catalysts that can change the narrative on the stock.

The fourth-quarter deliveries guidance is expected to show "large-step" improvement in delivery recovery for November and December, Yu said. The analyst also expects the Nio Day 2021, to be held on Dec. 18, to serve as a potent catalyst, given expectations the company will announce new models and technologies at the event.

Yu recently raised his price target for Nio shares from $60 to $70, while reiterating a Buy rating.

After ending Tuesday's regular session down 5.93% at $40.64, Nio shares are down 2% at $39.80 in after-hours trading.