Are you ready for June 9? On that morning, before the U.S. market opens, China-based electric vehicle (EV) manufacturer Nio (NYSE:NIO) will release an important set of data points. This could boost NIO stock, but I wouldn’t count on it. Much more likely, Nio’s loyal investors will continue to witness their holdings lose value.
I warned people to sell their Nio shares in May and stay away. I’m doubling down on that stance in June, as a negative quarterly report could prompt Nio’s investors to run for the exits. Even if you like Nio and believe in its long-term future, this isn’t a good time to jeopardize your hard-earned capital.
NIO Stock Is Heading Toward Penny-Stock Levels
There’s a lesson to be learned about what can happen if you buy stocks during a hype phase. Do you remember when financial traders piled into EV stocks in early 2021, and NIO stock peaked at $62?
Those were heady times, but the hype phase couldn’t last forever. Two and a half years ago, fundamentals didn’t matter too much. Traders were willing to overlook the fact that Nio is a consistently unprofitable company.
Yet, to borrow an old Benjamin Graham/Warren Buffett phrase, the stock market couldn’t ignore the weighing machine (i.e., a company’s fundamentals) forever. Nio’s management stubbornly refused to cut the automaker’s EV prices, and this hasn’t helped Nio compete against automotive giant Tesla (NASDAQ:TSLA).
So now, NIO stock is slowly but steadily heading toward the $5 level. That’s the penny-stock cutoff level, so Nio’s die-hard shareholders need to exercise caution.
Why June 9 Is a Critical Date for Nio
Reportedly, Nio plans to release its first-quarter 2023 financial and operational results on the morning of June 9. The company will also host a conference call that morning.
I recommend maintaining rock-bottom expectations. As you may recall, Nio missed Wall Street’s EPS forecasts during the last three reported quarters. In particular, Nio’s fourth-quarter 2022 EPS result of -43 cents was a far cry from the analyst consensus estimate of -26 cents.
Besides, while I don’t have a crystal ball, I can still see a pattern of declining EV deliveries. Alarmingly, Nio delivered 10,378 vehicles in March of this year but then only delivered 6,658 vehicles in April. Then, in May, the automaker delivered 6,155 vehicles, thereby continuing this unsettling downward trend.
You Still Have Time to Sell Your NIO Stock Shares
Nio has no track record of beating or even meeting Wall Street’s EPS expectations. Furthermore, Nio’s month-over-month EV deliveries have declined.
Therefore, it’s difficult to hold NIO stock with confidence as the company prepares to release its Q1 2023 results. The safest strategy is to stay out of the trade and be sure to divest your Nio share holdings before the morning of June 9.
On the date of publication, David Moadel did not have (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.