Why Nio Stock Bounced Back Today

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What happened

After Chinese electric vehicle maker Nio (NYSE:NIO) released its August delivery and guidance update yesterday, investors immediately began selling. The company’s American depositary shares dropped about 4% early in yesterday’s trading, though they recovered most of that decline by the end of the day. And those shares are bouncing back more early Thursday, with gains of about 3.5% as of 10:20 a.m. EDT.

So what

With Nio’s $66 billion market cap, investors value it on its potential rather than its current business. When the company reported that it delivered 5,880 vehicles in August, and that it was “prudently” lowering guidance for the third quarter due to supply chain issues, some shareholders didn’t wait to take money off the table. That level of vehicle deliveries represented a more than 25% sequential drop versus July 2021 deliveries. 

Nio ES8 electric SUV. Image source: Nio.

But Nio isn’t the only Chinese EV maker facing the semiconductor supply issues. Competitor XPeng also reported a sequential drop in its August deliveries yesterday. 

Now what

Nio did give investors some positive news that may have helped investors decide the monthly delivery update provided yesterday shouldn’t be the only data point to consider. Nio also said its level of new orders reached an all-time high in August. 

The company’s adjustment in third-quarter delivery guidance amounted to a 4% decrease at the midpoint of the estimated range. Nio recently expanded production capacity plans and shipped its first product outside of China to Norway. After letting that information sink in, investors seem to be thinking the slower rate of growth experienced in August will be less impactful in the long run than some perhaps thought at first glance. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.