NIO Stock Is Slumping. There’s Probably Nothing Wrong.
A NIO ES6 electric sport utility vehicle.
Sean Gallup/Getty Images
American depositary receipts in Chinese electric-vehicle maker NIO is down double-digits over the past 10 days. There isn’t much to explain the drop. No big analyst downgrades or shocking announcements. Recent stock market action leaves investors wondering what’s happening.
The short answer is probably nothing. Recent stock performance is the calm before the storm. The coming storm, of course, is earnings.
NIO (ticker: NIO) shares are down about 13% over the past 10 days. What’s more, stock in Chinese EV peers Li Auto (LI) and XPeng (XPEV) are off about 7% and 16%, respectively, over the same span. The S&P 500 and Dow Jones Industrial Average, for comparison, are both, essentially, flat.
Stock in EV leader Tesla (TSLA), however, is down too, by about 7%. Tesla is the EV behemoth and most valuable car company on the planet. Many EV-related stock target prices are set using Tesla valuation as a reference point. Whatever happens to Tesla stock happens to everyone in the space.
Tesla missed fourth-quarter-earnings projections in late January. Shares are down about 9% since then. That appears to be the biggest reason Tesla stock has been weak.
Earnings for the three Chinese firms come after Tesla. Li is due to report fourth-quarter earnings first on Feb. 25 before the market opens for trading. NIO comes next, reporting Mar. 1 after the market closes. XPeng goes last, reporting March 8, before the market opens for trading.
None of the three are expected to be profitable yet. Analyst project a loss of 4 cents per share for Li, a loss of 6 cents per share for NIO, and a loss of16 cents per share for XPeng.
Profits aren’t totally out of reach. Some analysts project breakeven results for NIO and Li. What’s more, vehicle deliveries were better than expected in December.
More important, that earnings, however, will be how Chinese EV sales are trending early in the year. January sales from NIO, Li, and Xpeng were interpreted by the market as good, but not great. The three stocks are down about 9%, on average, since the end of January.
Deliveries, plus the recent price action, makes the coming earnings reports a little higher stakes than usual. But earnings reports are always important for high-flying stocks. Shares of the three Chinese EV makers are up about 185% over the past six months.
Write to Al Root at [email protected]