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Why Nio Stock Is Lower Today

By John Rosevear – Aug 13, 2021 at 12:34PM

Key Points

  • The electric vehicle maker's guidance for the third quarter was conservative, and a Wall Street analyst is urging caution.

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Earnings beat estimates, but the automaker's outlook isn't so rosy.

What happened

Shares of Chinese electric vehicle maker Nio (NIO 21.71%) were trading lower on Friday. A Wall Street analyst trimmed his bank's price target for Nio's American depositary shares after the company provided conservative guidance with its earnings report on Wednesday.

As of noon EDT, the shares were down about 3.2% from Thursday's closing price. 

So what

Nio reported its second-quarter results after the U.S. markets closed on Wednesday, and while they were somewhat better than Wall Street had expected, the conservative guidance might have raised some eyebrows.

Two of those eyebrows might have belonged to Citigroup analyst Jeff Chung. He has been bullish on Nio, but seems to have felt the need to caution his clients somewhat after the company's earnings call. In a note released on Thursday, he lowered the bank's price target to $70 from $72, saying that he's reducing his estimates for the automaker's average selling prices and gross margins over the next couple of years.

Chung maintained a buy rating on the shares, but his sense of caution might be affecting the stock price today. 

Li is shown on an auto-show stage with a white NIO ET7, an upscale electric sedan.

Nio CEO William Bin Li unveiled the company's upcoming ET7 sedan in January, but it won't be out until next year. Image source: Nio.

Now what 

Nio's third-quarter guidance is conservative, but we should be clear that it's not terrible. It said that auto investors should expect third-quarter deliveries between 23,000 and 25,000 vehicles, and revenue between $1.38 billion and $1.49 billion. 

Even at the low end, both metrics would be roughly double its year-ago results. But they would represent only modest increases over Nio's results in the current quarter: 21,896 vehicles delivered and revenue of $1.31 billion. With the stock already pricing in aggressive growth, investors might have to moderate their expectations for the next few quarters. 

Citigroup is an advertising partner of The Ascent, a Motley Fool company. John Rosevear has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nio Inc. The Motley Fool has a disclosure policy.

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