What happened
On Tuesday, an analyst highlighted an "underappreciated" growth catalyst for Nio (NIO +0.96%). Just the previous day, Nio also confirmed having made progress on its growth plan for the year. Yet none of it could prevent Nio stock from tumbling on Tuesday: It dipped 6.4% in early morning trade before regaining some of its lost ground. At 1:10 p.m. ET, though, Nio stock was still down about 3%.
A rival may have just hinted at decelerating growth in Nio's largest market, and that appears to have spooked investors.
So what
Nio, XPeng (XPEV +0.03%), and Li Auto are among the three largest electric vehicle (EV) players in China. On Tuesday, XPeng released its second-quarter numbers, and they were worrisome, to say the least.
XPeng's deliveries were flat sequentially, its net loss more than doubled on rising raw material costs, and it projected a pretty big sequential drop in its deliveries for the third quarter. In other words, XPeng's Q2 numbers and guidance portend a slowdown in China.
As it is, investors in Chinese stocks have been jittery of late as the nation battles a property crisis amid a strong COVID-19 wave. China's central bank unexpectedly cut its benchmark interest rate in mid-August, fueling fears of a slowdown in the nation. Meanwhile, a severe drought in a key region has crippled the hydropower industry and poses a major headwind for the manufacturing sector, including the EV industry.
XPeng's latest numbers have only stoked fears and hit Chinese stocks across the EV industry on Tuesday. XPeng stock was the worst hit and it sank by double digits Tuesday, but Nio and Li Auto weren't spared.
If not for XPeng, though, Nio stock could have met with a better fate, given the latest development: On Aug. 22, Nio confirmed it had shipped the ET7 to Europe.
Europe is the only international market that Nio has entered so far, and its flagship sedan ET7 will be its second EV to launch in the nation after its SUV, the ES8. In line with its plans outlined earlier in the year, Nio said it'll start delivering the ET7 in five European markets this year, including Norway and Germany.
NYSE: NIO
Key Data Points
Now what
The ET7 shipment to Europe reflects Nio's focus on international expansion. Interestingly though, Deutsche Bank analyst Edison Yu believes the market isn't appreciating this growth aspect of Nio just yet, according to The Fly.
In a research note released on Tuesday, Yu also highlighted how Nio CEO William Li's recent visit to the U.S. and his scouting for a "potential location" for Nio's first store in the U.S. was another important development that has gone under the market's radar. Calling Nio's overall international expansion plans "underappreciated," Yu reiterated a buy rating on the EV stock with a price target of $45 per share.
With Nio stock hovering just around $18.30 per share as of this writing, Yu's optimistic views backed by Nio's growth moves could compel long-term investors to pay closer attention to the EV stock.
