NIO’s earnings have been good and stocks have fallen. Here’s why.

NIO's earnings have been good and stocks have fallen.  Here's why.

NIO plans to deliver 16,500 to 17,000 vehicles in the fourth quarter. Getty Images

Chinese electric vehicle maker NIO reported strong third-quarter results on Tuesday evening. Still, the stock was down after hours of trading, down around 3%. But with NIO shares on the rise lately, a small drop will likely be seen as a victory by shareholders.

NIO (ticker: NIO) reported a loss of 12 cents per share against $ 667 million in sales. Sales increased 146% year over year. Analysts – based on Wall Street and overseas – were looking for a loss of 19 cents a share on revenue of around $ 663 million.

The results, relative to expectations, look strong, but the stock was lower mainly because the bar was set exceptionally high. The NIO stock, after all, has risen 68% over the past month. The S&P 500 and the Dow Jones Industrial Average, for comparison, both added about 4% over the same period.

Since the start of the year, NIO shares have risen by almost 1,100%. Maybe NIO should have signaled something very special to see a big post-profit rebound.

In fact, this rebound may have occurred before the profits were declared. NIO peers Xpeng (XPEV) and Li Auto (LI) released third quarter results just a few days ago. NIO shares are up 10% since Xpeng, the first company to report, released figures on the morning of November 12. XPeng and Li shares rose 33% and 44% respectively over the same period.

Inventory reaction aside, NIO’s quarterly report appears to tick all the boxes. Besides sales growth, profit margins have increased. “Our momentum of order growth has continued steadily, thanks to the expanded brand awareness, growing user base, extensive sales network and, most importantly, compelling products and technologies,” CFO Steven Wei Feng said in the company’s press release. “At the same time, our continuous improvement in operational efficiency, cash flow and balance sheet has laid a solid foundation for our future sustainable growth and our decisive investments in technology.

Going forward, the company plans to deliver 16,500 to 17,000 vehicles in the fourth quarter. NIO delivered 12,206 vehicles in the third quarter. Its estimated growth in deliveries in the fourth quarter, starting from the third quarter, looks a little better than forecasts given by XPeng and Li Auto.

Deliveries are expected to translate to around $ 930 million in revenue, according to the company. It is also a little better than what analysts expected for the current quarter.

Where will the stock go from here, everyone’s guessing. The rally left stocks trading around 15 times estimated sales in 2021. That’s much higher than Tesla (TSLA) and much higher than NIO’s trading history. Analysts’ highest target price for NIO stock is around $ 46, very close to Tuesday’s closing level.

The company has scheduled a earnings conference call at 7 p.m. Eastern Time to discuss the results. Analysts and investors will be keen to learn about future production rates and demand for EVs in China.

Write to Al Root at