Earnings on Tuesday: is NIO the better Tesla?
Today we want to shine a light on an electric vehicle producer – but not Tesla. Instead, its Chinese competitor NIO.
While Tesla's stock has performed really well in 2020 so far (it's up a staggering 400% year-to-date), NIO's stock performance is even more staggering: the stock of the Chinese electric vehicle production company is up more than 900% year-to-date, making it the 6th biggest car manufacturer, worldwide, based on market capitalization.
NIO earnings for Q3/2020 after Tuesday's market close – will it pop a bubble?
NIO is expected to report earnings on Tuesday for Q3/2020 after market close. The consensus is an Earnings per Share (EPS) forecast for Q3/2020 of $ -0.17 per share. For comparison purposes: the reported EPS for the same quarter last year was $-0.33.
One of the main reasons for NIO's massive rise in 2020, can certainly be found in the fact that the Chinese-based electric vehicle company is massively profiting from Chinese national policy, which has encouraged the launch of several Tesla rivals in China, the world's largest auto market.
In fact, industry insiders expect Chinese players across the Electric vehicle supply chain to aggressively enter the overseas market within the next five years.
That's probably one of the main reasons many Wall Street analysts are very positive for NIO's stock. For example, JPMorgan upgraded the company to an overweight rating at the end of September, giving out a price target of $40, which is massively higher than the previous $14 price target.
Still, while the recent parabolic up-move in NIO's stock price has so far more than doubled in Q4/2020, questions arise on the sustainability of the recent push higher, especially on how much is potentially already priced into a better-than-expected earnings release on Tuesday after markets close.
What can certainly be assumed is that volatility should be expected to stay elevated in the days and weeks to come.
How can you trade #NIO.US in this environment?
In general, we'd be really careful with anti-cyclical short engagements in the parabolic rise we have recently seen. Developments in Tesla over the summer clearly serve as a warning sign here and many traders may have burned serious money trying to short such a strong and parabolic rising momentum - respectively growth stock.
Into the last weekly close we have seen a short aggressive push above the psychologically relevant 50USD mark, but NIO shares were aggressively sold off into the last weekly close, resulting in a massive 14USD intraday candle from daily high to daily low.
While the 40USD mark could hold into the last weekly close, it remains to be seen if bulls will be successful here again, especially if earnings on Tuesday after markets close can't fuel another wave of optimism and bullishness.
That said, our make-or-break level is 40USD: a daily close below, probably even below last week lows at around $38.50 could level the path for a deeper correction to as low as 29.00/20:
Source: Admiral Markets MT5 with MT5SE Add-on #NIO.US Daily chart (from April 29, 2019, to November 16, 2020). Accessed: November 16, 2020, at 12:00 PM GMT. Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2019, #NIO.US fell by 36.89%. In 2020, through to November 12, 2020 it has risen by 971.64%.
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