NIO Falls As Margins Decline

Key Insights

• NIO released its first-quarter report, beating analyst estimates on both earnings and revenue. 
• Traders focused on falling margins and deliveries guidance for the next quarter. 
• The market remains worried about China’s zero-COVID policy which increases risks of lockdowns in Shanghai.

NIO Retreats After Q1 2022 Report

Shares of NIO found themselves under strong pressure after the company released its first-quarter results.

The company reported revenue of $1.56 billion and an adjusted loss of $0.13 per share, beating analyst estimates on both earnings and revenue.

In the first quarter, NIO delivered 25,768 vehicles compared to 25,034 vehicles in Q4 2021. Vehicle margin declined from 20.9% in Q4 2021 to 18.1% in Q1 2022. Gross margin has also declined from 17.2% to 14.6%.

In the second quarter of this year, NIO expects to deliver between 23,000 and 25,000 vehicels. Total revenues are expected to be in the $1.47 billion – $1.59 billion range.

The market focused on falling margins and modest guidance, which was bearish for NIO stock. In addition, it looks that traders remain worried about the possibility of more lockdowns in Shanghai.

What’s Next For NIO Stock?

Analysts expect that NIO will report a loss of $0.54 per share in the current year and a loss of $0.11 per share in the next year. Analyst estimates have been moving lower in recent months, which is not surprising given the negative impact of lockdowns in China.

In recent weeks, NIO stock managed to move away from yearly lows amid a broad rebound in Chinese stocks. It should be noted that NIO stock is down by more than 70% from the highs that were reached back in 2021, so some speculative traders may see this major pullback as a buying opportunity.

In the near term, NIO stock will remain sensitive to news about the situation with coronavirus in China. The company’s second-quarter guidance already looks bleak, and another lockdown will further hurt margins and deliveries.

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