The Latest Results Signal More Trouble Ahead for NIO Stock
Sliding lower throughout February, investors in Nio (NYSE:NIO) perhaps were expecting NIO stock to kick off the new month with a big move higher, following the release of the China-based electric vehicle maker’s latest quarterly results….
Sliding lower throughout February, investors in Nio (NYSE:NIO) perhaps were expecting NIO stock to kick off the new month with a big move higher, following the release of the China-based electric vehicle maker’s latest quarterly results.
Unfortunately, far from rallying post-earnings, NIO made yet another move lower following the Mar. 1 earnings release. With both earnings and guidance falling short of expectations, the market correctly bid down shares following these underwhelming numbers.
Although this post-earnings pullback for Nio is relatively modest, a bottoming-out may not be imminent. This latest disappointing further calls into question whether the company, after underdelivering in the latter half of 2022, will finally exceed, or at least meet, expectations during the latter half of this year.
Unless subsequent developments prove otherwise, for now, it’s best to assume that this floundering EV stock will remain in a slump, on its way to lower prices.
NIO Stock and Recent Earnings
For the quarter ending Dec. 31, 2022, Nio reported revenue of around $2.3 billion. Although this represented a meaningful increase compared to revenue figures from the prior year’s quarter (around $1.6 billion), Nio’s Q4 2022 figure fell short of the sell-side’s forecast ($2.5 billion).
For Q4, net losses came in at $838.9 million, or 51 cents per share. These losses were more than double those reported during Q4 2022 and were nearly double what analysts were expecting for the quarter (around 26 cents per share). If that’s not bad enough, as I mentioned above, Nio underwhelmed with its latest guidance/outlook as well.
For the current quarter, the EV maker expects to deliver between 31,000 and 33,000 of its vehicles, generating between $1.6 billion and $1.7 billion in revenue. Prior to earnings, Wall Street was expecting Q1 2023 revenue guidance to come in at around $2.5 billion.
With such lackluster numbers, it’s somewhat surprising that NIO stock has only made a single-digit move lower since the earnings release. Then again, maybe not. There’s still a narrative out there providing shares with some support, but it continues to lose its effect.
Why the ‘Reacceleration Narrative’ Could Keep Fading
As NIO today trades for a mere fraction of its all-time closing high ($62.84 per share), you may already think that the “story” behind Nio has already completely unraveled. Sure, few are holding out that this company remains on track to become a leader in the EV space on par with Tesla (NASDAQ:TSLA).
But among investors that are still very bullish on NIO stock, there’s still the belief that, after many setbacks, this company’s “liftoff moment” will finally arrive. With the release of new vehicle models, China’s economic recovery, plus the EV contender’s expansion into overseas markets like Europe, these investors believe that Nio will experience a material re-acceleration in revenue growth.
In turn, driving a move out of the red, and to consistent profitability. This will enable the stock to zoom back to materially higher price levels. However, while many NIO investors still believe in this “reacceleration narrative,” their numbers could continue to dwindle.
That’s not to say NIO is set to experience a hard fall in the immediate future. It may signal, though, if near-term results remain weak, a further loss of confidence in the “narrative” will keep shares on their current trajectory.
Most of the latest news out of Nio is negative in nature. I will admit, though, that the company’s February delivery numbers (released alongside earnings) were somewhat promising. During the month, Nio delivered 12,157 vehicles. This represented a 43% increase in deliveries versus January.
Still, this may not be a sign that the situation here is improving. As implied by the aforementioned guidance, the company (at best) expects March deliveries to beat this figure by only a few hundred vehicles.
At worst, rising competition from Tesla, as well as the end of China’s EV subsidies, may continue to weigh on demand during this month, and through the spring.
More signs still point to more disappointment ahead. As this will further erode the “reacceleration narrative,” continue to steer clear of NIO stock.
NIO stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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