Why Nio Stock Dropped This Week
Key Points
Nio's Q2 earnings report highlighted headwinds for the EV maker.
Deliveries keep marching higher, keeping the company on the path to profitability.
Investors have been closely watching Chinese electric vehicle (EV) maker Nio (NYSE: NIO) for signs of progress toward profitability. Record-breaking EV deliveries late last year had it on the right path.
But its latest quarterly report showed it took a small step back in Q2. That led to a stock sell-off this week, with shares down about 14% as of late Friday morning, according to data provided by S&P Global Market Intelligence.
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Nio reported revenue increased 69% year over year in the second quarter. It was also a 26% boost sequentially over the first quarter. But the loss from operations actually increased slightly compared to the first quarter. While both were still massive improvements compared to the year-ago periods, investors want to see the move to actual income from operations.
That could still be coming soon. As shown in the chart below, Nio continues to grow EV deliveries, with 14.5% year-over-year growth in August.
Data source: Nio. Chart by the author.
That bodes well for Q3 as long as cost increases don't outpace sales growth. Component costs as well as fierce competition in China and Europe have been headwinds for the company and other EV makers.
This week's dip in the stock could be a good entry point if the company achieves profitability over the next year.
Howard Smith has positions in Nio. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.