NIO’s shares slip on concerns about guidance and gross margins

June 10, 2022

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NIO Inc.($NYSE:NIO) shares slipped on Thursday as guidance and gross margins aroused concern. The Shanghai-based EV manufacturer reported a lighter loss on EPADS than expected while a 24.2% jump in revenue from 2021 to $1.56B also narrowly beat expectations for the first quarter. The company’s shares have been under pressure recently as investors worry about the company’s ability to achieve sustainable profitability. While NIO’s first quarter results were better than expected, the company’s guidance for the second quarter was below analyst expectations. In addition, NIO’s gross margins also declined sequentially in the first quarter, raising concerns about the company’s ability to maintain profitability in the face of intensifying competition. Looking ahead, it remains to be seen whether NIO will be able to achieve sustained profitability. The company’s shares are likely to remain under pressure in the near term as investors monitor the company’s progress on this front.

Market Reaction

On Thursday, shares of Chinese electric vehicle maker NIO Inc. (NIO) dropped by 7.7% from the previous day’s close, amid mixed news sentiment surrounding the company. On the one hand, a number of analysts have raised concerns about the company’s financial situation and its ability to compete in the Chinese electric vehicle market. On the other hand, NIO has received some positive news recently, including a strategic investment from Chinese tech giant Tencent Holdings Ltd.

VI Analysis

NIO’s fundamentals reflect its long-term potential, as seen in the company’s strong asset base and growth prospects. However, the company is weak in terms of profitability and dividend payouts, which may pose a challenge in sustaining future operations. NIO’s health score of 4/10 suggests that it is likely to be able to withstand future market volatility and maintain its current operations. NIO is classified as a ‘cheetah’ company, which refers to a company that has achieved high revenue or earnings growth but is considered less stable due to lower profitability. At the right price, NIO may be a suitable investment for those who are looking for high capital gains. However, investors should be aware that high growth companies are generally more volatile than their slower-growing counterparts.

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The stock is down 7.7% from its recent high, and some analysts are predicting further downside. The company reported mixed news on its latest earnings call, with revenues coming in above expectations but gross margins falling short. This led to concerns about NIO’s ability to generate profits in the future. The stock is still up significantly from its IPO price, but the recent weakness has some investors worried. Many are predicting that the stock will continue to fall in the near-term.

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