What happened
Shares of Chinese electric car leader Nio (NIO 0.38%) dropped Tuesday morning after reporting deliveries data for February.
As of 10 a.m. ET, Nio stock is down 3.4%.
Can Nio CEO William Bin Li interest you in a new electric car? Image source: Nio.
So what
Nio reported a 10% increase in the number of cars delivered in comparison to February 2021 -- which sounds like good news. Problem is, in January Nio reported a 34% increase in deliveries year over year. As a result, one way of looking at the numbers is to say "Nio is growing." But another way of looking at them -- and the way investors do seem to be looking at them today -- is to say that that all of a sudden, Nio is growing less than one-third as fast as it was growing last month.
And that doesn't sound like good news.
Now what
Granted, car sales and car deliveries numbers do wobble from month to month, so perhaps investors shouldn't make too much out of this month's results being slower than last months. And management is putting a brave face on the news, emphasizing longer-term trends in sales growth: 23.3% year-over-year growth in sales for 2022 in total, and cumulative deliveries of 182,853 ES8, ES6, and EC6 electric cars since the models were introduced.
I'm in favor of companies taking such longer-term perspectives of their work. That being said, I also get why investors might be feeling the tiniest bit nervous today, what with Nio stock remaining still unprofitable ($1.5 billion in losses over the last 12 months) and selling for a heady seven times trailing sales.
With sales being the only reliable measure for valuing the stock right now, sales growth rates take on outsize importance -- and Nio's sales growth rate is heading in the wrong direction.
