NIO Before Q4 Earnings: Buy the Stock Now or Wait for the Results?

China-based EV company NIO Inc. NIO is slated to release fourth-quarter 2024 results on March 21, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at a loss of 42 cents a share on revenues of $2.85 billion. 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

The loss estimate for the fourth quarter of 2024 has widened by 2 cents a share over the past 60 days. However, the bottom-line projection indicates an improvement from a loss of 45 cents reported in the year-ago period. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 18.3%.

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For 2025, the Zacks Consensus Estimate for NIO’s revenues is pegged at $14.2 billion, implying a rise of 46.3% year over year. The consensus mark for the 2024 bottom line is pegged at a loss of $1.03 per share, indicating an improvement from a projected loss of $1.43 in 2024. In the trailing four quarters, NIO surpassed EPS estimates twice for as many misses, with the average earnings surprise being 2.31%.

Q4 Earnings Whispers for NIO

Our proven model does not conclusively predict an earnings beat for NIO this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

NIO has an Earnings ESP of -4.76%% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

What’s Shaping NIO’s Q4 Results?

For the three months ended Dec. 31, NIO delivered 72,689 vehicles, up 45.2% year over year. This figure also reflects a rise from 61,855 units delivered in the third quarter of 2024. The fourth-quarter deliveries set a new quarterly record for the company, within its projected range of 72,000-75,000 vehicles.

NIO has expanded beyond its luxury lineup with the launch of a more affordable ONVO brand. In September, deliveries of L60 — ONVO’s first product — commenced. In the fourth quarter of 2024, 19,929 L60 units were sold. L60 is cheaper than EV giant Tesla’s TSLA Model Y in China, giving tough competition to TSLA’s Model Y in the country.

Revenues for the quarter to be reported are expected to have benefited from increased deliveries. However, it is likely to have been somewhat offset by pricing pressure, thanks to stiff competition in the EV landscape.

Amid the volume ramp-up and cost optimization of components and supply chains, vehicle margins are on an upward trend. The metric grew to 9.2% in the first quarter of 2024, 12.2% in the second quarter and 13.1% in the third quarter. The trend is expected to continue in the to-be-reported quarter. Encouragingly, NIO targets a vehicle margin of around 15% for the fourth quarter of 2024.

NIO has been struggling with operational inefficiencies for several quarters. In the last reported quarter, SG&A expenses rose 13.8% year over year. This trend is likely to have continued due to higher personnel costs and increased spending on sales and marketing. High operating expenses may have hurt profit margins. Investments in battery swapping stations and store expansion could have further strained cash flow and overall finances.

NIO Stock Price Performance & Valuation

On a year-to-date basis, shares of NIO have declined 12.4%, outperforming the industry but underperforming its close peers — Li Auto LI and XPeng XPEV.

YTD Price Performance Comparison

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NIO is currently trading at a forward sales multiple of 0.69, higher than the industry but lower than XPEV and LI.  

NIO Looks Undervalued Compared to LI & XPEV

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How to Play NIO Stock Now

NIO is expanding its presence in the EV market with a strong lineup of SUVs and sedans. The launch of the ONVO brand and the upcoming Firefly brand aim to boost deliveries further. The company expects vehicle sales in 2025 to double from the 2024 levels.

Despite its growth efforts, NIO faces challenges. Strong competition may force price cuts, impacting profitability. The company has yet to achieve a full-year profit due to high R&D and expansion costs. While it aims for higher EV sales next year, rising expenses from ONVO’s expansion and pricing pressures could hurt margins. External risks, such as tariffs and trade tensions, add further uncertainty. Additionally, NIO’s cash reserves are shrinking (from RMB 32.9 billion in December 2023 to RMB 23.7 billion in September 2024), raising concerns about financial flexibility.

For now, investors should closely watch whether NIO meets its vehicle margin targets and improves operating efficiency. New investors should wait for clearer signs of profitability before jumping to buy the stock. However, existing shareholders should hold their positions, as long-term growth prospects remain intact despite near-term headwinds.

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This article originally published on Zacks Investment Research (zacks.com).

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