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Why Nio Stock Popped, Dropped, Then Popped Again Today

By Howard Smith – Nov 10, 2021 at 11:33AM

Key Points

  • Investors who hoped that the company moved closer to profitability were disappointed.
  • Nio still has several potential catalysts to get back on track.

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The Chinese EV maker reported its third-quarter financial update, showing it has hit a bump in the road.

What happened

Widely followed Chinese electric vehicle (EV) maker Nio (NIO -5.43%) released its third-quarter financial report after the bell last night, and investors are having mixed reactions. The company's American depositary shares (ADSs) initially jumped 3.6% Wednesday morning, but then turned into the red, before returning to a gain. As of 11:15 a.m. EST today, its shares were trading up 2.2%.

So what

Nio had previously reported that it delivered 24,439 vehicles in the third quarter, more than doubling what it reported in the year-ago period. That figure also exceeded lowered expectations after the company alerted investors that supply chain constraints were affecting production. But third-quarter results showed the company's net loss and operating losses grew sequentially from the prior quarter. 

White Nio ET7 luxury electric sedan.

Nio's ET7 luxury electric sedan will be available early next year. Image source: Nio.

Revenue of more than $1.5 billion was 16% above the second quarter, as the company delivered 12% more vehicles in the third quarter. But it said vehicle margin dropped more than 200 basis points sequentially from the previous quarter. 

Now what

The drop in vehicle margin is notable for investors who might have initially just looked at gross margin, which grew. That increase in gross margin, however, was due to sales of automotive regulatory credits, according to the company. 

Vehicle margin dropped, it said, because of "increased financing at subsidized rates for vehicle purchases which resulted in a deduction of vehicle revenue and an increase in tooling depreciation cost." And the bottom line was a loss of about $130 million in the quarter, compared to a net loss of $91 million in the second quarter of 2021. 

Investors who hoped the third quarter was another step closer to profitability were disappointed. But Nio shares likely are holding up today because there are still several catalysts coming that look promising.

Nio began selling in Norway earlier this year, and will expand in Europe with sales planned in Germany next year. And the company has said it plans three new products in 2022, including the highly anticipated ET7 luxury sedan. Those plans are likely what helped keep the stock trading in the black today as investors digest the third-quarter results. 

Howard Smith owns shares of NIO Inc. The Motley Fool owns shares of and recommends NIO Inc. The Motley Fool has a disclosure policy.

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