Insights

Why Nio Shares Rose Tuesday

What happened
Nio (NYSE: NIO) releases its first-quarter update Thursday morning, and investors should be expecting added volatility. The report comes after some of its Chinese peers released their own updates, so investors have some ideas on what to expect. Nio’s American depositary shares (ADSs) are moving higher today in anticipation. As of 3:12 p.m. ET, Nio ADSs were 1.7% higher, after having moved up 2.5% earlier today. 
So what
Nio investors might be expecting good news from the first quarter after competitors XPeng and Li Auto both beat estimates. It isn’t so much first-quarter results that might be adding to volatility, but rather what the company will say about the difficult current second quarter. Chinese EV makers have had to adjust production schedules around supply chain disruptions prompted by COVID-19 lockdowns in the second quarter. Investors reacted negatively to what competitor XPeng said about the second quarter when it reported its first-quarter results on May 23, 2022. XPeng shares tumbled 5.5% following that report. 
Image source: Nio.

Now what
In addition to production being suspended or throttled due to parts shortages, the lockdowns crushed the market for EVs in the cities affected. So investors aren’t sure what to expect for Nio sales and deliveries for the balance of the second quarter.
Nio shares have been typically volatile around its earnings reports. The stock has moved an average of about 4.5% either up or down around those reporting dates, according to a Barron’s report. The report notes, however, that options markets are implying a move of more than twice that for Nio’s quarterly report on Thursday. 

Of course that volatility is only a short-term metric. Long-term investors won’t be overly concerned by an oversized move, and will be focusing on how its vehicle deliveries are going compared to prior months. Especially how sales of the newly launched ET7 luxury sedan are doing. That’s especially important since Nio will be following that up with the mid-size ET5 sedan later this year, as well as the recently unveiled ES7 SUV model. 
Howard Smith has positions in Nio Inc. and XPeng Inc. The Motley Fool has positions in and recommends Nio Inc. The Motley Fool has a disclosure policy. –

What happened

Nio (NYSE: NIO) releases its first-quarter update Thursday morning, and investors should be expecting added volatility. The report comes after some of its Chinese peers released their own updates, so investors have some ideas on what to expect. Nio’s American depositary shares (ADSs) are moving higher today in anticipation. As of 3:12 p.m. ET, Nio ADSs were 1.7% higher, after having moved up 2.5% earlier today. 

So what

Nio investors might be expecting good news from the first quarter after competitors XPeng and Li Auto both beat estimates. It isn’t so much first-quarter results that might be adding to volatility, but rather what the company will say about the difficult current second quarter. Chinese EV makers have had to adjust production schedules around supply chain disruptions prompted by COVID-19 lockdowns in the second quarter. Investors reacted negatively to what competitor XPeng said about the second quarter when it reported its first-quarter results on May 23, 2022. XPeng shares tumbled 5.5% following that report. 

Image source: Nio.

Now what

In addition to production being suspended or throttled due to parts shortages, the lockdowns crushed the market for EVs in the cities affected. So investors aren’t sure what to expect for Nio sales and deliveries for the balance of the second quarter.

Nio shares have been typically volatile around its earnings reports. The stock has moved an average of about 4.5% either up or down around those reporting dates, according to a Barron’s report. The report notes, however, that options markets are implying a move of more than twice that for Nio’s quarterly report on Thursday. 

Of course that volatility is only a short-term metric. Long-term investors won’t be overly concerned by an oversized move, and will be focusing on how its vehicle deliveries are going compared to prior months. Especially how sales of the newly launched ET7 luxury sedan are doing. That’s especially important since Nio will be following that up with the mid-size ET5 sedan later this year, as well as the recently unveiled ES7 SUV model. 

Howard Smith has positions in Nio Inc. and XPeng Inc. The Motley Fool has positions in and recommends Nio Inc. The Motley Fool has a disclosure policy.

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