Just a quick heads up on Nio, there is no bad point of entry — even while the stock is rallying over 15% a day — as long as you get out by the end of January (February if you don’t mind risk). I know what all the finance guys say but NONE of them know ANYTHING about the car market.
It takes around 2,500 deliveries per month for Nio to make money actually building the cars. You can glance at their Q4 earnings and adjust for the ES6 being an assumed lower margin but a higher volume vehicle. That’s what I’m looking for, a minimum of 2,500 deliveries per month through the end of the year.
A very interesting thing about China is that it has one of the most consistent monthly car sales structures I have ever seen. The big thing to know is that September through January is the hype-maker, and that the February Freefall is traditional and always terrifying.
July and August are two of the worst months for car sales in China. However, with Nio delivering preorders beginning at the end of June, they have effectively secured strong sales for July and August which turns a weakness into a strength by pushing non-preorder buyers into the ES8 if they can’t wait or over into September sales and on.*
*This is also a great way to find out what kind of moat is inside the brand name by how many people either jump into an ES8 or wait for September and on to get the ES6.
Notice that the yearly shape stays relatively the same. You can always spot February because it’s a massive drop from January followed by a big rebound for March.
And this is to show how long this has been going on.
So, Nio already told us that they had around 12,000 preorders for the ES6 to deliver this year. From the end of June until September, Nio will be delivering 6,000 first edition cars. This means that we can expect that July and August will have at least 2,000 ES6 deliveries plus the ES8 should be selling a minimum of 500 units (I think it will average over 1,000 units per month even with the ES6 on sale).
This means that Nio has essentially secured profitablity for the rest of the year as far as making sure that they make more selling the cars than they lose building them (this is the most telling metric in the entire auto industry). Of course, there are other expenses that need to be accounted for but those only come up quarterly.
I’m not going to jump into any other stuff since I’m not sure if you all are into automotive market and brand geekdom, especially with a Chinese startup car brand selling electric crossovers. All I’m saying is that this company is all growth from June 2019 through January 2020. Nio’s Q2 earnings won’t include the cost of the recall, and they should beat on earnings, beat on revenue, and give some extremely positive forward guidance for Q3 which should all be reported around mid-to-end of August.
One last note, remember that while dropping from $6 to $3 is a 50% loss, going from $3 to $4.50 is a 50% gain and leaves you room for an additional 50% gain if you believe that the stock will return to its previous level. That’s all I will say on that besides that Nio is intrinsically more valuable between September through the end of January than any other time during the year, especially this year versus last year.
There will still be more big dips, but there isn’t a price between now and September that won’t be demolished by the end of January.