Why NIO Stock Fell Almost 15% in March

An eventful month for the Chinese electric-car maker did not terminate a downtrend within the inventory.

Howard Smith

What took place

Shares of popular Chinese electric-car (EV) maker NIO (NYSE:NIO) sank 14.9% in March, per recordsdata equipped by S&P World Market Intelligence. That added to a February fall, bringing the two-month decline to greater than 30%. 

So what

NIO shares soared alongside with other shares within the EV sector in 2020. Nonetheless as hobby charges began to upward push in early 2021, traders began to rotate out of high-growth shares like NIO that are valued on future earnings, and into value names. 

NIO additionally had firm-explicit recordsdata in March, alongside side releasing its fourth-quarter and whole-twelve months 2020 financial outcomes, and an instantaneous affect from the worldwide semiconductor scarcity. 

red NIO ES6 electric SUV

NIO ES6 electric SUV. Image provide: NIO.

On March 1, NIO reported fourth-quarter 2020 outcomes that met analyst expectations on earnings of about $1 billion, but showed a greater secure loss than became expected. Whereas car gross sales soared bigger than 130% within the fourth quarter and bigger than doubled for the beefy-twelve months versus the prior-twelve months sessions, investor expectations are high after the inventory won bigger than 1,100% in 2020. 

Shares took more of a hit later within the month of March, when the firm mentioned it would be suspending manufacturing for five days due to the dearth of semiconductors that has impacted many other global automakers. 

Now what

NIO estimated the manufacturing shutdown might presumably maybe presumably additionally minimize its first-quarter deliveries by as much as 1,000 vehicles, to 19,500. Traders responded by knocking shares down bigger than 5% the day of the announcement. Subsequent to the terminate of the month, alternatively, NIO reported first-quarter deliveries of 20,060. This became within the course of the firm’s contemporary guidance vary, and represented growth of 423% over 2020’s first quarter. 

The inventory has rebounded off most modern lows, but is aloof bigger than 36% off highs reached in early February. 

NIO Chart

NIO recordsdata by YCharts

Traders are additionally having a undercover agent forward to the inaugurate of the ET7, NIO’s first luxury sedan. It wish to be available early next twelve months, and is equipped with a increased 150 kWh battery pack that will present a unfold of about 621 miles, per the firm. 

With a market capitalization of over $60 billion even after the inventory’s retrenchment, the firm can maintain to continue its tempo of gross sales growth and originate the ET7 a hit with customers. There’s a gigantic seemingly EV market in its dwelling country on my own, and the firm might presumably maybe presumably additionally develop into its valuation snappy if the business would not expertise extra interruptions. 

This article represents the idea of the author, who might presumably maybe presumably additionally just disagree with the “unswerving” advice space of a Motley Fool top price advisory carrier. We’re motley! Questioning an investing thesis — even one in every of our maintain — helps us all have faith critically about investing and originate choices that lend a hand us turn out to be smarter, happier, and richer.

Howard Smith owns shares of NIO Inc. The Motley Fool owns shares of and recommends NIO Inc. The Motley Fool has a disclosure policy.”>

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