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Why Nio Stock Dropped on Earnings Day

By Rich Smith – Nov 9, 2021 at 10:56AM

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Investors buckle up for a possible sales miss in Q3.

What happened

Nio's (NIO 4.64%) earnings aren't even out yet, but already shares of the Chinese electric car maker are running downhill.

As of 10 a.m. EST, Nio stock has shed 4.4% of its market capitalization.

Person examines a stock chart superimposed on a Chinese flag.

Image source: Getty Images.

So what

Nio announced earlier this month that it will report fiscal third-quarter 2021 earnings after close of trading this afternoon. What will Nio report?  

Well, earlier this month, the company warned of a 27.5% plunge in its October deliveries, relative to cars delivered in October 2020. That certainly sounds ominous. On the other hand, Nio also said that it is continuing to expand its ability to produce new cars, aiming for an annual production capacity of 240,000 electric vehicles.

Meanwhile, the company remains on track to begin selling its new ET7 luxury sedan in China next year, and to begin sales of its ES8 electric SUV in Norway as well, both of which are developments that could help improve sales next year.

Now what

On Wall Street, forecasts call for Nio to report third-quarter sales more than doubling to $1.46 billion. If October's negative sales surprise upends that expectation, things could get ugly -- the more so because Nio's earnings are anticipated to remain negative with a loss of $0.09 per share.  

And yet, the more decisive factor driving Nio stock up or down tonight may be the company's forecast. On Yahoo! Finance, analysts are hoping to see Nio finally turn a profit in the fourth quarter -- $0.01 per share. The company's still probably at least a year away from delivering full-year profits, mind you. But if Nio can at least promise to meet analyst expectations in Q4, October's negative delivery surprise should soon be forgotten.

Rich Smith 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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