January often heralds new beginnings, and for investors, it's a time to reassess portfolios and look for growth opportunities. NIO, a player in the Consumer Cyclical sector and the Auto Manufacturers industry, presents an intriguing case. Despite a challenging financial landscape, with a gross profit of **$5.1B** and cash and short-term investments totaling **$39.1B**, NIO has a solid foundation to support its ambitious growth plans. The company's capital expenditures of **$7B** reflect a commitment to innovation and expansion, crucial for staying competitive. However, potential investors should be mindful of the significant loss in net income, recorded at $14.4B, and an EBITDA of $14.2B, which signal current operational challenges. With retained earnings at a loss of $69.9B, the company has yet to reach profitability, a common hurdle for many in the high-growth phase of the auto manufacturing industry. The total current liabilities stand at $45.9B, and with short and long-term debt totaling $23.7B, NIO's leverage is considerable. Despite these financial headwinds, the market sentiment
appears cautiously optimistic, with analysts issuing one buy and four strong buy recommendations, suggesting a belief in NIO's potential to overcome its current obstacles. The possible upside price of $10.72 indicates room for growth, which could be fueled by strategic maneuvers and the continued support of investors. As NIO navigates the complexities of its financial situation, the company's stock may indeed be poised for growth as it enters the new year, but it will require careful monitoring of its leverage and ability to turn losses into profits. NIO Inc. Class A is set to announce its earnings tomorrow. The highly anticipated quarterly report is expected to be released on December 5, 2023. Currently, the stock is experiencing very aggressive trading activity. As of December 4, 2023, NIO's Tangible Asset Value has shown remarkable stability compared to the previous year. Working Capital is projected to increase to approximately $14.1 billion, while Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) are expected to decrease to around $10.2 billion.
While many baby boomers remain indifferent to the automotive sector, NIO Class A presents itself as an appealing option for millennials. Our analysis will concentrate on whether the upcoming year could herald improved fortunes for NIO Class A shareholders.
Nio financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Nio, including all of Nio's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Nio assets, the company is considered highly leveraged. Understanding the composition and structure
of overall Nio debt and outstanding corporate bonds gives a good idea of how risky
the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis
Understanding Nio Total Debt
Nio Class A liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Nio Class A has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Nio balance sheet include debt obligations and money owed to different Nio vendors, workers, and loan providers. Below is the chart of Nio main long-term debt accounts currently reported on its balance sheet.
You can use Nio Class A financial leverage analysis
tool to get a better grip on understanding its financial position
How important is Nio's Liquidity
Nio financial leverage
refers to using borrowed capital as a funding source to finance Nio Class A ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Nio financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Nio's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Nio's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown
between Nio's total debt and its cash.
Breaking down the case for Nio
The big decline in price over the last few months for Nio Class Amay encourage insiders to take a closer look at the firm as it is trading at a share price of 7.32
in trading volume. The company management teams failed to add value to investors and position the firm supply of money to exploit market volatility
. However, diversifying your holdings with Nio Class or similar stocks can still protect your portfolios during high-volatility market scenarios. The stock standard deviation of daily returns for 90 days investing horizon is currently 3.86. The above-average risk is mostly attributed to market volatility and speculations regarding some of the upcoming earning calls from Nio Class A partners.
|Assets Non Current
"Investing is not about how much you make, but rather how much you don't lose." As investors consider the growth potential of NIO's Class A stock in January, several key financial metrics come into play.
With a current ratio of 1.59X, NIO demonstrates a reasonable balance between its assets and liabilities, suggesting financial stability. However, the substantial net losses of **14.4 billion** underscore the challenges the company faces in achieving profitability. Despite these losses, the market capitalization of **12.87 billion** indicates investor confidence in NIO's future growth prospects within the auto manufacturing industry. Institutional ownership stands at 33.84%, showing a significant level of interest from sophisticated investors. With a price to earnings ratio of 10.16X, NIO's stock may appear reasonably valued, but its performance will ultimately hinge on the company's ability to manage expenses, innovate, and increase market share in the competitive electric vehicle sector. .
Will Nio Class recent roll up continue?
The recent decline in the coefficient of variation for Nio Inc.'s Class A stock to -751.85 indicates a significant reduction in volatility compared to its average return. This change may be perceived by investors as a sign of stabilization in the stock's performance. Such a statistical adjustment could serve as an indicator of a potential price increase, as investors often look for periods of reduced volatility as opportunities to enter the market. Considering this development, along with Nio's strategic position in the growing electric vehicle sector, there is a reasonable possibility that the stock may sustain its upward trend, assuming the company continues to demonstrate positive operational and financial progress. Nevertheless, investors should exercise caution and take into account overall market conditions and specific news related to the company before executing any trades. Nio Class A stock currently exhibits relatively low volatility, with a skewness of -0.92 and a kurtosis of 3.6. However, we recommend that investors conduct a thorough analysis of Nio Class A's technical indicators to confirm that all market information is accounted for and reliable. Recognizing different volatility patterns in the market can often assist investors in timing their market entry and exit. Proper application of volatility indicators allows traders to assess the risk of Nio Class A's stock in relation to market volatility
during both bullish and bearish trends.
The increased volatility typically associated with bear markets can have a direct impact on Nio Class A's stock price, causing anxiety for investors as they observe a decline in the value of their holdings. This often leads investors to rebalance their portfolios by acquiring different stocks as prices drop. In conclusion, Nio's Class A stock's robust performance today certainly grabs the attention of investors looking for growth opportunities in the electric vehicle sector. With a Naive Expected Forecast Value of $6.86 and a Valuation Real Value pegged at $8.66, the stock shows potential for upward movement. However, investors should weigh this against the Analyst Overall Consensus of 'Hold' and the mixed signals from the market. While the Analyst Target Price Estimated Value stands at an encouraging $12.841, with the highest reaching up to $19.2, the current Analyst Number of Buys is relatively low at 1, with 4 Strong Buys and 6 Holds, indicating a cautious optimism. The possible upside price of $10.72 offers a glimpse of the growth trajectory, but the possible downside price of $3.01 serves as a reminder of the inherent volatility in the sector. As the fiscal year-end approaches in December, investors should keep a close eye on Nio's performance metrics and market trends before making any decisions. .
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