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What Drove Shares of NIO 36% Higher in July

By Scott Levine – Updated Aug 2, 2019 at 5:24PM

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It looks as if this electric vehicle manufacturer's stock turned a corner this summer. But looks can be deceiving.

What happened

Reversing course from the 60% drop they experienced through the first half of 2019, shares of electric-vehicle (EV) manufacturer NIO (NIO -1.78%) climbed 36% in July, according to data from S&P Global Market Intelligence. Although the primary driver of the stock's rise last month was related to one of its peers, news of the company's progress helped sustain the stock's lift through the rest of the month.

So what

Absent of any news directly related to the company, shares of NIO rose 7% on July 3 following news from the day before that Tesla (TSLA -8.62%) delivered 95,200 vehicles in its second quarter, a company record. NIO's shareholders apparently interpreted Tesla's news as a sign of strong demand for EVs and a potentially auspicious sign of similarly strong Q2 deliveries report from NIO -- one that would mark continued momentum for the China-based EV manufacturer.

A view of a showcase featuring NIO's electric vehicles.

Image source: NIO.

In April, for example, NIO reported that March deliveries of its ES8 totaled 1,373, a 69% increase over its 811 deliveries in February.

One week after Tesla's report, NIO followed suit, releasing its own deliveries report, which illustrated strong demand for its premium EV models. In Q2, NIO delivered 3,553 vehicles, including 413 ES6s, of which the company commenced deliveries in June. Sending shares down nearly 7% on the day when NIO reported the deliveries data, shareholders were probably disappointed that the company's Q2 deliveries represented an 11% quarter-over-quarter decline. On the other hand, shareholders who held fast and didn't sell were probably encouraged that NIO's Q2 deliveries of 3,553 exceeded by 11% the upper end of management's Q2 deliveries forecast of 2,800 to 3,200 vehicles.

Overall, however, investors were unconvinced after NIO's deliveries report. From the day of the report through the rest of July, shares slipped 6%.

Now what

Rather than buying the rumor and selling the news, shareholders bought the encouraging news of NIO's peer, Tesla, and sold news of its own Q2 deliveries. The stock's action in July is a clear reminder that there's a significant degree of volatility implicit in an investment in the EV manufacturer. Nonetheless, plenty of investors are intrigued by the EV manufacturer, and for those who find themselves in that boat, the company's Q2 earnings results, expected later in August, should be of paramount interest.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Nio Inc. Stock Quote
Nio Inc.
NIO
$15.49 (-1.78%) $0.28
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