2nd Skies Trading

Is This EV-Manufacturer A Buy After The Recent Earnings Report?

A few years ago the Society of Automotive Engineers of China predicted that by 2035, half of China’s car fleet would be running on alternative energy.

Already today, China is the country that has the highest number of electric cars in the world whilst offering a low-cost environment for manufacturers.

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One big player in this field is the Chinese multi-national electric car manufacturer NIO Inc. (NYSE: NIO), which was founded in 2014. The company recently released their Q2 earnings (Aug 11th) backing up the above-mentioned facts with a strong increase in vehicle sales and lowered material costs, further shrinking its quarterly losses.

Close to 22k vehicles were delivered in Q2 (up 112% year-over-year), increasing quarterly revenue to $1.3 billion (up 148% year-over-year). For Q3, NIO expects to deliver between 23k-25k vehicles, generating sales of approximately $1.4 billion.

A quick look forward shows that NIO’s ES8 model soon is set to debut in Norway and the company also has announced two new EV models, one of which is a lower-priced model expected to directly compete with Tesla’s Model 3, paving the road for continued growth.

Another stable revenue driving factor is NIO’s battery-as-a-service program which not only builds stable cash flow, but also is known to increase buyers’ loyalty.

NIO’s recent numbers are showing that the company seems to be successful in following up on its ambitious growth plans and 2022 looks to be another year of strong growth for the company. Thus, long-term we have an overall bullish outlook on NIO and think it’s a solid buy on pullbacks into key support zones.

Technical Analysis

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After topping out around $64 in Q1 this year, the stock sold off 50% before finding support from which it launched higher in June/July, showing strong bullish interest between $30.7-$34.

Price is now pulling back towards this support zone which we think is a good location to start looking for potential longs in NIO.

Option Positioning

NIO currently has approximately 1.6M calls and 1.6M puts with about a third of those options rolling off this Friday. Hence, the later we go into the week, the greater the option fuel to push NIO higher rolls off.

Option positioning suggest resistance should come in around $40 which lends itself to potentially buying pullbacks next week.

FULL DISCLOSURE: Chris Capre currently has no stock or option position in NIO. If you’d like to learn more about Chris’s trades and positions, you can get access via the Trading Masterclass where he shares his live trades, further investment ideas and daily market analysis.

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