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Why NIO Stock Turned Negative after Q3 2018 Earnings Call

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Dec. 4 2020, Updated 10:50 a.m. ET

NIO’s Q3 2018 earnings

Chinese electric carmaker NIO (NIO) released its third-quarter results on November 6. These were the first quarterly results reported by the company after its listing on the NYSE in September 2018. In the third quarter, NIO reported an increase in its adjusted net loss per share to about 10.35 Chinese yuan, or $1.51, as compared to 57.82 Chinese yuan in the second quarter of 2018 and 58.52 Chinese yuan in the third quarter of 2017. The company’s reported loss was much worse than the Wall Street analyst estimates for a net loss per share of 2.36 Chinese yuan. Before we begin to look at key highlights of NIO’s third-quarter results, let’s take a quick look at how investors reacted to its earnings event.

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Investors’ indecisiveness

NIO’s third-quarter earnings report was released on Tuesday before the market opened. Investors’ initial reaction was positive, and its stock surged over 10% in the pre-market session. However, all of these gains were erased later during the day, and NIO stock ended the session with 4.2% losses from the previous day’s closing price. Despite the company’s strong future growth outlook, its lower-than-expected revenues could be one of the factors that took a toll on its stock.

During NIO’s third-quarter earnings call, its management suggested that some customers had canceled their pre-orders due to delays in ES8 car deliveries (XLY). The cancellations could be another factor that hurt investors’ sentiments after its earnings call. On a quarter-to-date basis, NIO has lost 8.3% as of November 6, while US electric carmaker Tesla (TSLA) has gone up by 28.8% quarter-to-date. Alibaba (BABA) and Baidu (BIDU), other Chinese companies, have lost about 10.5% and 15.8% quarter-to-date, respectively.

Series overview

In this series, we’ll take a closer look at NIO’s third-quarter earnings, revenue, and gross margins. We’ll explore the key highlights of the company’s earnings event and analysts’ ratings on its stock. Later in the series, we’ll take a look at some important factors that could negatively affect its valuation multiples in the fourth quarter.

Correction: An earlier version of this article equated the increase in NIO’s adjusted net loss per share of about 10.35 Chinese yuan to $1.51 million rather than merely $1.51.

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