Jeff Kilburg says ‘buy’ as Nio stock tanks 10% after its Q2 earnings release

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Written on Aug 29, 2023

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Nio reports a weak Q2 but issues encouraging future guidance.
Jeff Kilburg shares his bullish view on shares of the EV company.
Nio stock has now lost more than 30% in less than four weeks.

Nio Inc (NYSE: NIO) opened more than 10% down on Tuesday after reporting its financial results for the second quarter that spelled weakness.

Notable figures in Nio Q2 earnings release

Lost ¥5.79 billion ($789.9 million) versus the year-ago ¥2.26 billion
Per-share loss also widened significantly from ¥1.68 to ¥3.70
Adjusted loss printed at ¥3.28 as per the earnings press release
Total revenue tanked nearly 15% year-on-year to ¥8.77 billion
Consensus was ¥2.96 a share loss (adj) on ¥9.16 billion in revenue

Nio delivered 23,520 vehicles in the second quarter – also down 6.1%. But Jeff Kilburg – the Chief Executive of KKM Financial said on CNBC’s “The Exchange”:

I think a lot of the bad news is priced in Nio stock. I want to be a buyer here from a trade perspective and also from a longer-term exposure to the Chinese EV market.

Nio stock down despite upbeat guidance

Still, the EV company issued encouraging guidance for the future. It now forecasts revenue to fall between ¥18.90 billion and ¥19.52 billion.

Nio had brought in ¥13.00 billion in the third quarter of last year. According to KKM’s Jeff Kilburg:

Nio stock has support at the 20-day MA just below $10. But I think if it gets back above its 50-day MA at $11.35, it can go back to where it was a year ago – $16 to $18.

The smart electric vehicles firm sees about 56,000 deliveries in Q3 which would represent a 77% increase on a year-over-year basis. It delivered 20,462 EVs last month – more than twice as much as it did in July of 2022.

Nio took a big hit to margins this quarter

Nio stock is taking a hit this morning also because increased demand for lower-margin used electric vehicles pushed its gross margin down to 1.0% versus 13% a year ago. Kilburg added:

It’s in reaction to lower margins due to Tesla cutting prices but when you think about the EV market, 60% of it comes out of China. So, I think there’s exposure here and you can own it directly in Nio.

Nio attributed the weakness in its recently concluded quarter to lower prices and decreased volume as well. Its cost of sales slid 3.0% in Q2.

Wall Street currently has a consensus “overweight” rating on the EV stock.