Investors have seen plenty of ups and downs in the stock market so far in 2023, as big gains in January gave way to a pullback in February. On the first day of March, markets opened mixed, with early morning gains reversing shortly after the official opening of trading.
Investors have been watching the electric vehicle industry closely, and with so much attention on the Chinese EV market in particular, companies like Nio (NIO 2.30%) are always in the spotlight when they deliver their financial results. The report Nio released early Wednesday showed both the growth potential for China's EV industry and the strains that currently plague it, and investors seem less convinced about the prospects for any single manufacturer of electric vehicles. However, other industries also have solid growth potential, and the gains that language learning company Duolingo (DUOL 5.34%) made following the publication of its latest quarterly report showed that there's still room for innovative businesses to attract interest from investors, even when they're not yet profitable.
Nio gives up ground
Shares of Nio were down about 3% shortly after the open on Wednesday. The Chinese EV company reported fourth-quarter financial results that weren't quite up to the expectations of investors in the high-growth industry.
From one perspective, Nio's sales figures were strong. Vehicle sales revenue jumped by 60% year over year to $2.14 billion, reflecting record deliveries of more than 40,000 EVs during the fourth quarter. However, its gross margin plunged from 17.2% a year ago to just 3.9% in the most recent quarter, and that caused its adjusted net losses to rise to $734 million, nearly triple the amount of red ink it spilled in the fourth quarter of 2021.
And sequentially, Nio's sales momentum has actually slackened so far in 2023. The company reported 8,506 vehicle deliveries in January and 12,157 in February, which represents a run rate far below its pace in the fourth quarter. Even as it touts advances in technology and vehicle features, the fact remains that Nio operates in a highly competitive niche, and it will have to keep standing out to retain any chance of remaining a leader in China's EV market.
Indeed, investors have been worried about Nio, fearing that the EV maker might not be able to live up to high expectations. Unfortunately, its latest report didn't do much to ease those concerns.
Duolingo flies higher
Meanwhile, shares of Duolingo were up 15% in early Wednesday trading. The language learning platform operator reported fourth-quarter results that showed continuing growth in premium subscribers, demonstrating the early success of its subscription-based revenue model.
Though it has failed to earn a profit thus far, Duolingo continued to make progress. Total bookings were up 39% year over year to $126.4 million, with subscription bookings jumping 44% from year-ago levels. The number of paid subscribers rose 67% over the past 12 months to 4.2 million, and its ad-supported free option supported a much larger cohort of users. Monthly active users climbed 43% year over year to 60.7 million, while the number of daily active users climbed by 62% to 16.3 million.
Financially, Duolingo saw revenue of $103.8 million, up 42% from the prior-year period. Its net losses narrowed somewhat to $13.9 million, and adjusted pre-tax operating earnings were in positive territory and sharply higher.
Duolingo has been a publicly traded company for about a year and a half, and its share price is starting to move back upward toward levels not seen since shortly after its IPO. That suggests that the business has been able to outlast the hype and put itself in position to generate real results for long-term shareholders.
