There’s been plenty of news (good and bad) with Nio (NYSE:NIO) stock recently. With the latest news being of the good variety, some may be thinking now’s the time to go bullish on NIO.

After all, in contrast to my past skepticism about the China-based electric vehicle maker experiencing a resurgence in growth during the back half of 2022, the latest delivery data (more below) signals that this may just well be happening.

Growth reacceleration notwithstanding, there’s something else in play that may limit NIO’s ability to hold steady at current prices (just under $11 per share). Much less, make a move back to higher price levels.

As I will explain in further detail below, it remains too early to shift one’s view on this widely followed EV play. Instead of “getting in early” on a recovery, those buying today could fall for a trap.

Is NIO Stock Back in the Growth Zone? Not So Fast

At the start of September, Nio reported its monthly delivery data for the preceding month. During the month of August, the EV maker delivered 19,329 vehicles. This represented an 81% increase in deliveries compared to the prior year’s month.

It was also the second month in a row that the company’s delivery volume well above levels reported both last year and earlier this year. This resurgence in deliveries may not be enough for Nio to hit its very ambitious 2023 sales target (250,000 vehicles), but it is by all means a step in the right direction.

If this level of monthly deliveries keeps up, reaching annualized sales of 250,000 (or more) is well within-reach. Or is it? Again, despite these strong numbers, I remain skeptical that a continued recovery for the company, and for NIO stock, is in store.

For one, much of this sales growth resurgence may be because of new vehicle launches in recent months, like the launch of the ES6 electric SUV this summer. Following an initial strong start, sales could cool off. A worsening of the Chinese economic slowdown may also affect future deliveries/sales.

Falling Margins are a Concern

Besides the questionable prospects of the company’s sales resurgence continuing, it’s also telling that NIO stock experienced just a brief uptick higher following the August delivery numbers release.

Those bullish on shares may think this discrepancy works to their advantage, but to me it suggests that the market believes something else counters that positive.

That would be Nio’s falling gross margins. Last quarter, vehicle margins fell to 6.2%. Compare that to the prior year’s quarter, when vehicle margins came in at 16.7%.

Although one can chalk this up to falling sales during the period, irrespective of whether the deliveries resurgence carries on, or if sales dip again, falling margins could continue.

Why? Back in June, Nio joined in on the Chinese EV price war. This may also contribute to the recent sales resurgence, yet it may mean as well that Nio’s vehicle margins will not improve much this quarter.

Without significant vehicle margin improvement, chances are that the company will keep struggling to narrow net losses/make a move towards consistent profitability. This leaves NIO more likely to continue being on a downwards trajectory.

Bottom Line: Still a Sell

NIO may on the surface seem like a prime “buy the dip” opportunity at lower prices, but the market doesn’t often mis-price stocks, especially high-profile stocks like this one.

Mr. Market has good reason to stay in “show me” mode with this EV play. The jury’s still out whether the aforementioned sales resurgence will lose steam or set to continue. The same goes with the company’s vehicle margins.

Taking this into account, now’s not the time to go contrarian. As the excitement (albeit muted) about last month’s vehicle sales dissipates, margin worries could intensify again. This may be enough to push NIO back down toward its 52-week low ($7 per share).

If delivery numbers for this month fall short of rising expectations, shares could dip to even lower prices. With this, there’s a clear takeaway: NIO stock is still a sell.

NIO stock earns a D rating in Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.