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Chart Talks: NIO retraced to a strong support zone. Is bounce on the way?
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bullrider_21 joined discussion · Aug 26, 2023 17:45

Is Nio's rebound on the way?

Since Nio bottomed at 7.00 in June 2023, it has broken out of the Falling wedge 2, the MA200 and the Downtrend line 1. It rose and then fell but rebounded off the support zone of 10.21-10.49. The MA50 crossed over the MA100 and it went on a tear. It surged to near the resistance at 16.44 and Downtrend line 2. It got rejected there and then plunged.
Fig. 1. Nio daily chart.
Fig. 1. Nio daily chart.
Fig. 2. Nio weekly chart.
Fig. 2. Nio weekly chart.
It fell below the Uptrend line, but that doesn't mean that the trend is bearish as it is still supported at the support zone and the MA200. It is likely to consolidate around the MA200 before rebounding to the resistance around 16.44 when the 20-week MA cross over the 50-week MA. If it breaks out of the Falling wedge 1 and the 100-week MA , it may rise to around the resistance at 24.43 which is near the 200-week MA.
Nio is still making losses. It is not expected to return to the black until next year or 2025. It is in the same stage as Tesla before it became profitable in 2Q2020. Before that, Tesla occasionally burned more than USD1 b of cash per quarter and nearly went bankrupt.
While operating expenses were much lower than expected in the first quarter, selling, general and administrative expenses (SG&A) should increase quarter-on-quarter as Nio aggressively promoted new models. All this translates into another big loss. But this will be reduced going forward as they cut costs and increase sales.
Nio management had previously mentioned that they expect vehicle margins to return to double digits in the third quarter and over 15% in the fourth quarter. The company had a vehicle margin of 5.1% in the first quarter. The full impact of the benefits may not be seen until next year.
In addition, cash burn will naturally improve in the second half due to good working capital and capex will be close to flat year-on-year or about USD7 b.
In July, Nio delivered a record 20,462 cars, which is about 104% more than a year ago. 3Q23 guidance is expected to be >60,000 and fourth quarter is expected to grow sequentially.
The forecast for deliveries in 2023 is 180,000 units. For 2024, the delivery forecast is 285,000 units and for gross margin is 13.9%.
CYVN Holdings' USD1 b in Nio is a vote of confidence. It should aid Nio's balance sheet and cash flow greatly.
So the outlook is looking brighter.
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