- NIO, like its competitors, saw its deliveries hampered because of supply chain disruptions.
- Rising competition is threatening NIO stock price.
- Investors will focus on the automobiles sold.
Nio Inc. (NYSE: NIO) stock has added 3.97% to its value for the past trailing 12 months (TTM), although the year-to-date (YTD) performance is underwhelming – NIO is down 11.37% YTD.
But the company’s shares took a different direction last month (October) when they rallied 11%. As of this writing, the stock was 21.66% in the green for the past trailing 30 days. This shows a solid performance in October, which should pique investors’ curiosity.
The chart above shows an exciting development in NIO’s price action. Particularly, October’s stellar performance enabled the stock to establish a firm trajectory above the EMA 20.
There is a high probability that stock will stay the course or even surge higher if Wall Street’s expectations of the company’s earnings materialize. To be sure, the Market Insider analysts estimate the company’s revenue to clock roughly $1.45 billion and a 9 cents per share loss.
Global supply crunch and restructuring affected Nio’s operations
Curiously, the analysts expect Nio’s per-share loss in Q3 2021 to surpass that for Q2, while revenue is expected to increase upwards by $100 million.
In the first place, Nio delivered 65% fewer automobiles in October than in September due to supply chain issues.
Secondly, the company’s deliveries slumped because of restructuring operations to its manufacturing lines. When releasing the weak delivery numbers for October, Nio explained that the weakness emanated from “restructuring and upgrades of manufacturing lines and the preparation of new product introductions from 28 September to 15 October.”
The global semiconductor shortage was also a significant headwind that Nio has had to navigate in Q3 2021. Previously, it lowered its guidance for deliveries, but investors are primed for whatever comes out of the company’s financial office later today.
Competition in the EV market is heating up
The NIO stock enjoyed lots of enthusiasm in the market for much of late 2020 and early 2021, were it not for the challenges mentioned above. But as the company prepares to unveil its Q3 earnings report, most investors know that rising competition is a challenge not to be wished away.
For example, Lucid and Tesla, the main rivals, threaten the company’s market share, and investors would love to hear what executives say about it. Thus, the earnings report will likely swing the NIO stock either upwards or downwards.
The other issue that investors will be watching is the company’s forward guidance on deliveries. Of course, October’s dismal performance had many investors worried, and an encouraging statement in the earnings report is the least they expect.
NIO stock movements
The chart above shows a curious pattern, where the NIO stock tends to decline sharply after the earnings report. However, it is noteworthy that the stock rebounded shortly after the dip.
Also, we mentioned earlier that NIO is down 11.37% YTD. In contrast, the S&P 500 is up 25.07% and has touched multiple record highs this year.
In other words, the NIO stock is underperforming vital benchmarks, and investors will be looking for a change. Most importantly, Nio executives should allay investor fears surrounding the supply chain disruptions and issue solid forward guidance (both for revenue and deliveries) to stimulate positive price action for NIO shares.
Bottom line
Nio was a darling of the market in 2020 before most of the current headwinds. Therefore, the executives’ work seems cut and dried – to assure the market that the company will navigate the headwinds successfully. Any more disappointments in the earnings report could see the stock price gap down.
