Investors have been dumping their shares of Chinese Electric Vehicle maker Nio Inc, (NYSE: NIO), which recently closed at $16.44. This drop signifies a 1.32 percent dip from the previous day. This decline contributed to an overall lag of 0.02 percent in the Standard & Poor's 500 Index. Overall, this slight shift is in line with the rest of the market: while the Dow did gain 0.3 percent in its value, the tech-heavy Nasdaq shed 0.16 percent.
In the days that followed, Nio Inc continued to drop in value. Wall Street will definitely be hoping for a little more positive momentum as the company approaches its next earnings report release date.
Nio Underperforms in March Earnings Report
Nio's most recent earnings report was not good. For March, the company showed a net loss of $336.4 million. This loss is more than 54 percent bigger than the same period from one year ago. In addition to this, analysts advise this overall loss represents an increase of 156.6 percent on a sequential basis.
While Nio does sell cars in Norway, China is definitely its most prominent market. That said, Nio only started selling their cars in Norway in 2022, which means that all 91,429 units sold in 2021 were done so in China. Unfortunately, those EV sales in China made Nio the ninth-largest EV seller in China (by volume).
Despite not selling a single vehicle in the United States since its NYSE debut in 2018, Nio has relied heavily on US investors to prop up their stumbling performance. Frustration from those investors and scrutiny from auditors in the US seem to imply that Nio needs to make some pretty bold moves if they want to stay afloat. That in mind, Nio did very recently list shares on the Hong Kong exchange.
Nio Sales Are Up But Is It Enough?
Unfortunately, this problem is even more complex than it seems. For one, Nio's sales are up 49.3 percent despite that 54.4 percent net loss expressed in the earnings report. At the same time, Nio only managed to deliever 5,074 vehicles in the month of April. That is a decline of 49 percent quarter-over-quarter. Of course, the continuation of the COVID-19 pandemic is not making things any easier; and ongoing supply chain issues further complicate the issues.
As a matter of fact, Nio Inc Chief Executive Officer William Li has recently confided that their biggest challenge at the moment is supply chain instability.
With this in mind, Li assures us that they expect consumer demand for electric vehicles will persist, despite the potential that the Chinese government will cut back on subsidies for this sector. On top of that, Nio has set out plans that include opening a local research center with a focus on self-driving cars and artificial intelligence.
The Whole EV Market is Struggling
Some investors have chosen to rid themselves of their Nio stock on the heels of rival Chinese EV manufacturer XPeng posting their underperforming second-quarter results. Dealing with similar restrictions due to COVID, in the second quarter, XPeng issued lower-than-expected guidance for the quarter.
Similarly, US-based Rivian Automotive has also experienced a loss in share value. This company is prioritizing the production of some models over others, which has angered their fan base and early customers who were the first to place a pre-order. Accordingly, investors that if XPeng continues to experience this strain in China, the same COVID regulations could definitely hamper Nio's ability to progress as well.
Nio Price Targets Reduced
Analysts are advising that investors may want to consider dropping Nio stock, regardless of which index it is on. For one, Nio does not sell automobiles in the United States. More importantly, Nio is not even considered a dominant carmaker in its own domestic market. Finally, shares of Nio are down roughly 3 percent for the month of March.
Indeed, analysts advise that NIO Inc has a median target of 31.07 with a range or 22.95 on the low end and 82.50 on the high end. This median estimate represents an approximate increase of 96.85 percent from the last price listing of 15.79.
Accordingly, Nio is now calling for earnings estimates to register down $0.63 per share with revenue of $9.84 billion. These figures represent YOY changes of +40 percent per share and +75.61 percent, respectively but with the persistence of COVID restrictions and supply chain issues, these numbers do not necessarily reflect business volume moving forward.
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