A NIO ES6 electric sport-utility vehicle
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The rally in the shares of U.S.-listed Chinese electric vehicle makers gets another big test Tuesday evening when the third of the three companies, NIO, reports third-quarter results.
NIO stock (ticker: NIO) is up about 57% over the past month and 245% over the past three months, crushing comparable returns of the Dow Jones Industrial Average and S&P 500 over the same spans.
The strong performance probably means more volatility after earnings are reported. Options markets imply an 15% to 20% move, up or down, after numbers are released. NIO shares have traded down after each of the previous three earnings reports. However, they jumped 54% after the company reported third-quarter 2019 earnings, to $3.78 a share from $2.43.
Now NIO trades for about $45.50 and has a market capitalization exceeding $61 billion, more than General Motors (GM).
Analyst target prices aren’t much help in trying to guess where NIO stock could trade. The average target price is up about 130% over the past three months, but that hasn’t kept up with the stock. The average analyst price target implies a drop of about 43%. The has been little correlation between target prices and the stock for the past couple of years.
It might be hard for investors to see shares rallying after earnings, but Chinese EV stocks have a tendency to surprise investors. Shares of XPeng (XPEV) jumped 33% after the company reported third-quarter numbers on Thursday.
XPeng peer Li Auto (LI) dropped 1.8% after reporting earnings a day later. Li stock, however, jumped 27% the day XPeng reported. What’s more, Li shares jumped about 15% Monday after Citigroup analyst Jeff Chung upgraded shares to Buy from Hold. Li shares were already up 61% the month before he upgraded the stock.
All the big price moves have left the Chinese EV sector trading at or near all time highs. NIO stock trades for about 15 times estimated 2021 sales. XPeng and Li trade for about 12 and 16 times estimated 2021 sales respectively.
Tesla (TSLA), for comparison, trades for about 9 times next year’s sales. When Tesla was NIO’s size, it traded for about 2 times estimated next year’s sales. That was almost a decade ago and a lot has changed for the EV industry since then.
NIO stock’s 50-day moving average is about $26 a share. That is one technical trading level investors can watch. The stock has traded well above its 50-day moving average since early June.
NIO scheduled a conference call at 7 p.m. Eastern time, after earnings are released. Investors and analysts will be eager to hear about new products and the health of the Chinese car market.
Investors will also want to hear about fourth-quarter deliveries. The company delivered more than 5,000 cars in October, its best month ever. Both XPeng and Li gave guidance for fourth-quarter deliveries.
NIO delivered 12,206 cars in the third quarter just ended. Investors will likely expect, at minimum, NIO to beat that in the fourth quarter.
Write to Al Root at [email protected]
