Why NIO Stock Tanked after Its Q4 2018 Earnings Release

Chinese electric carmaker NIO (NIO) released its fourth-quarter results on March 5. This was the second quarter of results the company has reported since its listing on NYSE in September 2018. In the fourth quarter, NIO reported an improvement in its adjusted net loss per share to about 3.20 Chinese yuan (or $0.47) as compared to 10.35 yuan in the third quarter of 2018 and 71.47 in the fourth quarter of 2017. Before we begin to look at key highlights of NIO’s fourth-quarter results, let’s take a quick look at how investors reacted to its earnings event.

NIO’s fourth-quarter earnings report was released on Tuesday after markets closed. In the aftermarket session on Tuesday, NIO stock saw a sharp sell-off, which continued on Wednesday. On March 6, the stock fell by 20.9%.

In its fourth-quarter earnings report, the company mentioned that it is canceling plans to construct its own car manufacturing plant in Shanghai. NIO plans to continue to outsource its car manufacturing to JAC Motors.

Also, during NIO’s fourth-quarter earnings conference call, its management suggested that based on initial orders, ES6 has received an underwhelming response as compared to its previous car model ES8.

On a YTD basis, NIO has gone up by 25.7% as of March 6, while the US electric carmaker Tesla (TSLA) has gone down by 17.0% YTD. Other Chinese companies (MCHI) (FXI) such as Alibaba (BABA), Tencent Holdings (TCEHY), Uxin (UXIN), and Baidu (BIDU) have risen by about 34.4%, 16.4%, 11.1%, and 7.3%, respectively.

In this series, we’ll take a closer look at the key highlights of NIO’s fourth-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 next few quarters.