What happened
Shares of the popular Chinese electric vehicle (EV) manufacturer NIO (NYSE: NIO) sank 14.9% in March, according to data from S&P Global Market Intelligence. This contributed to a drop in February, taking the two-month drop to more than 30%.
And
NIO’s shares soared along with other shares in the EV sector in 2020. But as interest rates started to rise in early 2021, investors began to switch from high-growth stocks like NIO, which are valued in future earnings, and worthy names.
NIO also had company-specific news in March, including the release of its fourth quarter and full-year 2020 financial results, and a direct impact of the global semiconductor shortages.
Electric SUV NIO ES6. Image source: NIO.
On March 1, NIO reported results for the fourth quarter of 2020 that met analysts’ expectations for revenue of around $ 1 billion, but showed a larger-than-expected net loss. While vehicle sales skyrocketed more than 130% in the fourth quarter and more than doubled year-over-year, investor expectations are high after the shares gained more than 1,100% in 2020.
The shares suffered another blow at the end of March, when the company said it would suspend production for five days due to a shortage of semiconductors that affected many other global automakers.
What now
NIO estimated that production shutdown could reduce first quarter deliveries by up to 1,000 vehicles, to 19,500. Investors responded by dropping the shares by more than 5% on the day of the announcement. After the end of the month, however, NIO reported deliveries in the first quarter of 20,060. This was within the company’s original guidance range and represented a 423% growth compared to the first quarter of 2020.
The stock rebounded from recent lows, but is still more than 36% below the highs reached in early February.
NIO data by YCharts
Investors are also looking forward to the launch of the ET7, NIO’s first luxury sedan. It is expected to be available early next year and is available with a larger battery of 150 kWh that will provide a range of around 621 miles, according to the company.
With a market capitalization of more than $ 60 billion, even after the reduction of shares, the company will have to continue its pace of sales growth and make the ET7 a success among customers. There is a huge potential EV market only in its home country, and the company can grow in its valuation quickly if the business is no longer disrupted.
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