Nio Stock: All Eyes on Earnings This Week — Here’s What Deutsche Bank Expects

Nio (NYSE:NIO) shares have been excluded from 2023's recovery rally, showing year-to-date losses of 21%. Zoom out further and the picture doesn't get any prettier, with the stock having retreated by 58% over the past year. The market underperformance is a reflection of real-world woes with the company currently going through its most difficult period since almost going bankrupt in 2020.

With the Chinese EV maker about to report 1Q23 earnings this Friday (June 9th, before the market opens), it's clear to Deutsche Bank's Edison Yu that Nio is "suffering from weaker-than-expected demand."

"While production and supply-chain issues appear to be resolved, the underlying demand for its premium BEVs has been disappointing with customers opting for BBA gasoline models and Li Auto EREVs," the analyst explained. "We attribute this underperformance to a combination of factors: high pricing, customer preferences, and ineffective marketing efforts."

Ahead of the print, Yu is anticipating a weak quarter with "margin downside risk and a very weak 2Q volume/margin outlook," some distance below consensus.

With Nio having recently announced quarterly deliveries of 31,041, at the low-end of it 31,000-33,000 guide, Yu is calling for revenue of 10.9 billion RMB in Q1, compared to consensus at 11.7 billion RMB.

Over the course of the quarter, and looking ahead to the revamping of its full SUV line-up, the company "aggressively" sold down older 866 inventory and the need for a promotional push to do so negatively impacted margins. As such, Yu expects a gross margin of 2.5, also below the Street's forecast of 7.4%. The result of which will be adjusted EPS of (3.07) vs. the analysts’ expectation of (2.66).

With the premium segment looking to be "electrifying more slowly than anticipated" and demand currently significantly muted, things are not looking great for Q2. That said, June will get a boost from a full month of new ES6 deliveries (historically, Nio's best-selling SUV model) and some contribution from the ET5 Touring.

Nevertheless, with Yu's forecasts for the year "down materially," the price target gets a slash, and is brought down from $19 to $13. However, there's still potential upside of 73% from current levels. Yu's rating stays a Buy. (To watch Yu's track record, click here)

Despite current issues, it's Buys all around on the Street – 4, in total – all coalescing to a Strong Buy consensus rating. The average target is higher than Yu will now permit; at $15.08, the figure makes room for one-year returns of 101%. (See Nio stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.