Earnings on Tuesday: is NIO the better Tesla?

November 17, 2020 10:00

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%.

Discover the world's #1 multi-asset platform

Admiral Markets offers professional traders the ability to trade with MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level than with MetaTrader 4. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
  4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
  7. Any kind of previous or modelled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
  9. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
Admirals An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.