Nio Shares Drop On Poor Sales; UBS Remains Neutral

Nio Inc NIO shares were falling Wednesday morning after the Chinese electric vehicle maker reported a first-quarter loss and expectations for lower sales.

While Nio saw a drop in sales volume in the first quarter, the weak results and soft outlook were generally expected, according to UBS. 

Investors boosted the stock price after Nio’s earnings report Tuesday, but the stock was giving the gains back Wednesday.

The Analyst

Paul Gong reiterated a Neutral rating on Nio with a $5.50 target price.

The Thesis

Nio reported a sales drop of more than 50 percent in the first quarter — and wasn’t very reassuring about the next few months, lowering guidance for shipments in the second quarter. But those results were largely in-line with expectations, Gong said in a Tuesday note. 

In addition to poor sales figures, Nio also said it is delaying the release of its new ET7 electric sedan, which it now plans to build on a new tech platform that requires its own assembly plant. Nio presently outsources production to a state-owned factory.

Nio’s balance sheet has improved following Tuesday’s announcement that Beijing E-Town International Investment and Development Co. Ltd will invest $1.45 billion in a new joint venture with Nio, backing a new manufacturing facility for Nio’s next-generation platform vehicles.

The cash injection will dilute the stakes of existing shareholder’s stake through a minority stake in Nio’s China subsidiary, Gong said. 

Nio's share price has recently “pulled back significantly, largely reflecting market disappointment," the analyst said. 

Price Action

Nio shares were down 7.29 percent at $3.69 at the time of publication Wednesday. 

Related Links:

Bank Of America Downgrades Nio On Lower Sales Expectations, Tesla Competition Expectations

Nio Trades Higher After Q1 Earnings

Photo courtesy of Nio.