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Why NIO Inventory Fell Virtually 15% in March – The Motley Idiot

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What occurred

Shares of well-liked Chinese language electric-vehicle (EV) maker NIO (NYSE:NIO) sank 14.9% in March, in keeping with information supplied by S&P World Market Intelligence. That added to a February drop, bringing the two-month decline to greater than 30%. 

So what

NIO shares soared together with different shares within the EV sector in 2020. However as rates of interest started to rise in early 2021, buyers began to rotate out of high-growth shares like NIO which might be valued on future earnings, and into worth names. 

NIO additionally had company-specific information in March, together with releasing its fourth-quarter and full-year 2020 monetary outcomes, and a direct impression from the worldwide semiconductor scarcity. 

NIO ES6 electrical SUV. Picture supply: NIO.

On March 1, NIO reported fourth-quarter 2020 outcomes that met analyst expectations on income of about $1 billion, however confirmed the next internet loss than was anticipated. Whereas car gross sales soared greater than 130% within the fourth quarter and greater than doubled for the full-year versus the prior-year durations, investor expectations are excessive after the inventory gained greater than 1,100% in 2020. 

Shares took extra of a success later within the month of March, when the corporate mentioned it might be suspending manufacturing for 5 days because of the scarcity of semiconductors that has impacted many different world automakers. 

Now what

NIO estimated the manufacturing shutdown might cut back its first-quarter deliveries by as much as 1,000 autos, to 19,500. Traders responded by knocking shares down greater than 5% the day of the announcement. Subsequent to the tip of the month, nonetheless, NIO reported first-quarter deliveries of 20,060. This was throughout the firm’s authentic steerage vary, and represented progress of 423% over 2020’s first quarter. 

The inventory has rebounded off current lows, however remains to be greater than 36% off highs reached in early February. 

NIO Chart

NIO information by YCharts

Traders are additionally wanting ahead to the launch of the ET7, NIO’s first luxurious sedan. It needs to be accessible early subsequent yr, and is accessible with a bigger 150 kWh battery pack that can present a spread of about 621 miles, in keeping with the corporate. 

With a market capitalization of over $60 billion even after the inventory’s retrenchment, the corporate should proceed its tempo of gross sales progress and make the ET7 a success with prospects. There’s an enormous potential EV market in its dwelling nation alone, and the corporate might develop into its valuation rapidly if the enterprise does not expertise additional interruptions. 

This text represents the opinion of the author, who could disagree with the “official” suggestion place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even considered one of our personal — helps us all assume critically about investing and make choices that assist us change into smarter, happier, and richer.





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