Please ensure Javascript is enabled for purposes of website accessibility

Why NIO Stock Fell Almost 15% in March

By Howard Smith - Apr 2, 2021 at 12:45PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An eventful month for the Chinese electric-vehicle maker didn't end a downtrend in the stock.

What happened

Shares of popular Chinese electric-vehicle (EV) maker NIO (NIO -2.76%) sank 14.9% in March, according to data provided by S&P Global Market Intelligence. That added to a February drop, bringing the two-month decline to more than 30%. 

So what

NIO shares soared along with other stocks in the EV sector in 2020. But as interest rates began to rise in early 2021, investors started to rotate out of high-growth stocks like NIO that are valued on future earnings, and into value names. 

NIO also had company-specific news in March, including releasing its fourth-quarter and full-year 2020 financial results, and a direct impact from the global semiconductor shortage. 

red NIO ES6 electric SUV

NIO ES6 electric SUV. Image source: NIO.

On March 1, NIO reported fourth-quarter 2020 results that met analyst expectations on revenue of about $1 billion, but showed a higher net loss than was expected. While vehicle sales soared more than 130% in the fourth quarter and more than doubled for the full-year versus the prior-year periods, investor expectations are high after the stock gained more than 1,100% in 2020. 

Shares took more of a hit later in the month of March, when the company said it would be suspending production for five days due to the shortage of semiconductors that has impacted many other global automakers. 

Now what

NIO estimated the production shutdown could reduce its first-quarter deliveries by up to 1,000 vehicles, to 19,500. Investors responded by knocking shares down more than 5% the day of the announcement. Subsequent to the end of the month, however, NIO reported first-quarter deliveries of 20,060. This was within the company's original guidance range, and represented growth of 423% over 2020's first quarter. 

The stock has rebounded off recent lows, but is still more than 36% off highs reached in early February. 

NIO Chart

NIO data by YCharts

Investors are also looking forward to the launch of the ET7, NIO's first luxury sedan. It should be available early next year, and is available with a larger 150 kWh battery pack that will provide a range of about 621 miles, according to the company. 

With a market capitalization of over $60 billion even after the stock's retrenchment, the company will have to continue its pace of sales growth and make the ET7 a hit with customers. There's a huge potential EV market in its home country alone, and the company could grow into its valuation quickly if the business doesn't experience further interruptions. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Nio Inc. Stock Quote
Nio Inc.
NIO
$16.20 (-2.76%) $0.46

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
331%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.