It has been a rocky trading day for Chinese electric vehicle (EV) company Nio (NYSE:NIO). Shares of NIO stock initially surged this morning before sinking into the red ahead of the company’s upcoming first-quarter earnings report scheduled for Friday, June 9.
Nio will report before market open and expectations are that Q1 earnings are likely to nosedive. Meanwhile, revenue is expected to continue to grow, albeit at a low rate (only 4.5% year-over-year). Interestingly, Nio has seen many earnings disappointments in recent quarters, suggesting that with the bar so low (the company is expected to lose 41 cents per share, more than triple the loss from Q1 2022), Nio better outperform on this metric. So far, investors appear to have little faith in Nio’s upcoming performance, positioning defensively ahead of the report.
That said, we have seen some major moves around various high-profile stocks in recent weeks. Anything is possible. If Nio reports an outsized beat on the top and bottom line, perhaps NIO stock is positioned to rocket higher from here. It is, after all, trading near multi-year lows at the time of this writing.
Let’s dive more into what analysts and market participants expect from Nio.
NIO Stock Sinks Ahead of Upcoming Earnings Report
Today is really the last day for investors to position their portfolios ahead of Nio’s upcoming Q1 report. The Chinese EV maker will release earnings before markets open tomorrow and will likely see significant volatility in early trading hours, depending on what’s announced and what the company says during its earning call.
Notably, the company’s Q4 results missed expectations. And while management appears to be confident in Nio’s ability to hit its impressive sales targets this year, analysts aren’t so sure. Some analysts remain cautious with respect to its upside potential, suggesting NIO stock is more of a “show me” story than anything else.
The company’s recent deliveries, which came in at the lower end of guidance, suggest that Nio will need to begin ramping up production to hit its targets. If the company can’t maintain a considerable growth rate, its valuation (which has been hit hard, to be sure), could still be too aggressive here. Thus, there’s probably more downside than upside with NIO stock right now, which is what the market is pricing in.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.