Nio (NIO) shares have been hammered in recent months, because of the China-based EV maker falling short of expectations.
Although the company reported solid deliveries growth for October, this growth is not as impressive when compared to that of peers.
Disappointment with Nio’s results is likely to continue, which in turn could keep NIO stock moving in a downward trajectory.
Nio (NYSE: NIO) has performed poorly over the past few months. Although shares in the China-based EV maker have found support in recent trading days, I wouldn’t assume that the dust has settled with NIO stock.
Yes, per the latest headlines, it may seem as if the situation will improve from here for Nio. The company just released monthly delivery numbers, and on the surface deliveries came in strongly. Take a closer look at the numbers, however, and it’s clear that these results are lackluster when compared to that of peers, and to past expectations.
That’s not all. Little suggests that the company will soon catch up to peers in terms of growth, investors are likely to remain disappointed with Nio’s performance. This, of course, bodes badly for shares.
With this in mind, read on, as I break down why the bear case still stands with this stock.
NIO Stock and Relatively Underwhelming Delivery Numbers
On Nov. 1, Nio reported 16,074 vehicle deliveries during October, representing a 59.8% increase in deliveries year-over-year. Impressive, right? Well, not quite. Even as deliveries climbed by a high double-digit amount last month, on a sequential (month-over-month) basis, growth was far less stellar.
As Nio’s September 2023 delivery numbers totaled 15,641 vehicles, October’s deliveries represented a sequential growth of only around 2.77%. The company figures aren’t impressive when compared to delivery numbers reported by China-based peers like Li Auto (NASDAQ: LI) and Xpeng (NYSE: XPEV).
Li’s October deliveries came in at 40,422 vehicles, a 302.1% year-over-year increase, and a 12.1% increase sequentially (based on 36,060 vehicles delivered in September). Xpeng’s deliveries came in at 20,000 for the month, up 292% on a year-over-year basis, and up 31% on a sequential basis.
While NIO stock did rise following this news, said rise was modest (2.05%) relative to LI (up 3.49%) and XPEV (up 7.04%). Also, the broad market rally on Nov. 1 may have played a larger role in NIO’s rally than on the deliveries news.
What This Deliveries Slump Means for Sentiment Going Forward
Taking a look at Nio’s delivery figures from July through October, there’s a clear takeaway. The end of China’s “zero Covid” restrictions, plus the launch of new vehicle models, enabled Nio to “level up” its monthly delivery volumes, which for an extended period were stuck at around 10,000 vehicles.
But while July’s delivery figure (over 20,462) may have suggested Nio was en route to hitting past aggressive sales targets set by management, sales volumes have fallen back in the ensuing months. Now, it appears that Nio can sustain monthly sales of around 15,000 vehicles, or 180,000 vehicles per year.
The issue? While selling 180,000 premium EVs annually isn’t necessarily anything to sneeze at, barring another round of “leveling up” during November and December, negative sentiment is likely to persist for NIO stock, resulting in further losses for investors. The reasons for this are twofold.
First, this recent leveling off calls into question whether revenue growth in the coming year will meet expectations. Sell-side consensus currently calls for sales to hit $13.23 billion next, a 56.75% increase. Second, this growth slump calls for yet another walking back of Nio’s timeline to profitability.
Bottom Line: Expect This Stock to Stay Under Pressure
Nio has already given back all of its gains accrued during the “EV bubble” era of 2020-2021, but don’t assume that means the stock is finding a floor, after falling back towards pre-bubble prices.
Even before the bubble, Nio was given a rich valuation relative to its then-current performance, on the expectation that it was going to become China’s answer to Tesla (NASDAQ: TSLA), a world-class EV brand with a global reach.
Yet now, it’s clear the company is likely to be an “also ran” brand in its home market. Over in Europe, its first area of international expansion, Nio is scrambling to boost sales, further signaling this isn’t a “Tesla killer” in the making.
Barring the unveiling of positive surprises in Nio’s upcoming earnings release (scheduled for Nov. 9), or with its November and December vehicle delivery numbers, expect NIO stock to stay under pressure.