Nio Inc. (NYSE:NIO) stock has been taking investors on a serious rollercoaster ride these past couple trading days.
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
On Friday if you recall, shares of the Chinese electric car-maker first surged 12% higher on news that the company grew its Q1 vehicle deliveries 20.5% year over year — then plunged to almost a 1% loss for the day as investors realized that the wheels on these strong Q1 results were already starting to come off in the second month of Q2. Specifically, deliveries in May declined more than 12%. And in guiding investors on what to expect through the rest of this second quarter of the year, Nio warned that unit sales will decline from 0.2% to 8.2%, and revenues will fall from 9% to 15.1%.
Nio did not tell investors how badly this will make Q2 earnings look. But Wall Street analysts, after crunching the sales numbers, are forecasting a $0.43 per share loss for Q2 — about 79% worse than a year ago.
Ouch.
And yet, after all of this news has come out, Nio stock jumped 8.67% higher on Monday — not quite as good as where the stock was trading at the height of Friday’s optimism, but close.
So what’s up with that?
Well in a nutshell, Nio seems to have realized that with its deliveries and revenues heading in the wrong direction, it is time for a course-correct. And so on Monday morning, Nio announced that it will cut prices on all of its EVs in China by $4,200 in an effort to goose sales by making its cars more price-competitive.
As Bloomberg reported Monday, Nio CEO William Li claims “this adjustment has been discussed internally for a long time.” Missing earnings on Friday, however, being forced to give an earnings warning for the coming quarter, and seeing investors’ negative reaction to this news, seems to have brought the matter to a head, and convinced Nio management to pull the trigger on the price cut.
Nor is Nio wasting time taking corrective action.
The price cuts will take effect “immediately,” reports Bloomberg. And at the same time as management moves to make its products more attractive to car-buyers, Nio is also moving to cut costs in hopes this will make its stock more attractive to investors. Spending on capital investments and research and development will all be cut, says the CEO (which is probably a good idea as Nio will now be bringing in less revenue per car, to pay for such investments).
Even so, Nio warned on Monday that it no longer expects to break even by Q4 this year. On the one hand, that’s probably not the best move if Nio wants to reassure investors — following up on a sales warning Friday by giving an earnings warning Monday. On the other hand, well … Wall Street wasn’t expecting Nio to turn profitable before late 2025 in any case, so the CEO’s saying that Nio won’t break even in late 2023 probably comes as no great surprise.
Overall, there’s no doubts on Wall Street that the bulls are running with NIO; the stock’s 10 recent analyst reviews break down 8 to 2 in favor of Buys over Holds for a Strong Buy consensus rating. The shares are priced at $8.40 and have an average target of $12.52, which indicates room for 49% growth in the year ahead. (See NIO stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
