Nio shares slide after missing Q1 earnings estimates

Today’s headlines

What’s happening: Shares of Nio Inc edged lower on Friday, after the company reported results for its first quarter.

What happened: The EV maker reported a narrower-than-expected loss for the latest quarter.

However, Nio was unable to meet the sales estimates and reported a sharp margin contraction.

How were the results: The Chinese company reported single-digit growth in sales for its first quarter.

• Sales rose 7.7% year-over-year to 10.7 billion yuan, or $1.56 billion, missing the consensus estimates of $1.63 billion.
• Adjusted loss came in at 36 cents per share, narrower than Wall Street expectations of 41 cents per share.

Why it matters: Demand for Nio’s electric vehicles remains strong in China and Europe. However, the company continues to struggle with higher labour and materials costs.

The company’s vehicle deliveries surged 20.5% year-over-year to 31,041 units, although this was down 22.5% from the previous quarter. This data was already released during the delivery update issued on April 1 and the stock has declined by more than 25% since then.

Nio’s vehicle sales slipped by 0.2% year-over-year to 9.22 billion yuan, and vehicle margins shrank by 1,300 basis points to 5.1% following changes in its product mix and higher battery cost per unit.

Gross profits for the quarter fell sharply by 88.8% to 162.3 million yuan and loss from operations rose to 5.11 billion yuan.

Management guided to vehicle deliveries of 23,000 to 25,000 units in 2023, representing a year-over-year decline of 8.2% to 0.2%. Nio projected revenues of 8.74 billion yuan to 9.37 billion yuan, representing a 15.1% to 9.0% year-over-year decline.

How shares responded: Nio’s shares fell 0.8% to close at $7.73 on Friday, following the release of quarterly results. The stock has lost around 38% over the past six months.

What to watch: Investors will continue monitoring supply chain and inflation, as both impact the company’s costs and margins.

The markets today

The Canadian dollar will be in focus today following the release of jobs data

Context: The CAD/USD forex pair edged higher on Friday, after data showed a surprise decline in jobs.

Details: The Canadian economy shed 17,300 jobs in May, the first decline in nine months. The figure came in better than market estimates of 23,200.

Canada’s unemployment rate rose to 5.2% in May, after remaining at 5% for the past five months. The latest increase in the jobless rate signalled the first monthly rise since August 2022.

On Wednesday, the Bank of Canada had raised its benchmark rate by 25 basis points to a 22-year high of 4.75%. Markets widely expect the BoC to announce another hike in July, with inflation remaining much higher than the central bank’s 2% target.

The price of crude oil, one of Canada’s major exports, fell $1.12 to close at $70.17 per barrel on Friday with weak data from China raising demand concerns.

The CAD/USD forex pair rose 0.07% to 1.3350 on Friday, after hitting its highest intraday level since April 14 during the session. For the week, the loonie added around 0.6% versus the greenback, representing the second straight week of gains.

The S&P/TSX Composite index fell 0.25% to close at 19,892.06 on Friday, extending losses for the third session in a row, amid a decline in the shares of gold miners and consumer staples.

What are expectations: Traders will watch US inflation data and the Fed’s interest rate decision this week. The release of data on housing starts, wholesale sales and manufacturing sales from Canada will also remain in focus this week.

Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.13%, 0.11% and 0.30%, respectively.

The news shaping the markets

North Korea has voiced its support for Russia in the invasion of Ukraine. The news sent the safe-haven US dollar index higher this morning.

Japan’s producer prices increased 5.1% year-over-year in May, followed a revised 5.9% rise in April, which exerted pressure on the JPY/USD forex pair.

Ireland’s BNP Paribas Real Estate construction PMI rose to 49.4 in May, from April’s three-month low of 48.4. The latest figure signalling the eighth straight month of contraction in construction activity sent the EUR/USD pair lower in forex trading this morning.

New Zealand’s electronic card transactions increased by 3.3% year-over-year to NZ$6,374 in May. This representing a slowdown from the prior month’s 6.4% surge exerted pressure on the NZD/USD forex pair.

Saudi Arabia’s industrial production growth slowed to 3.2% year-over-year in April, from 4.1% in the prior month, sending the SAR/USD pair lower in forex trading this morning.

What else to watch today

Japan’s machine tool orders, Turkey’s unemployment rate, labour force participation rate and current account, India’s industrial production, inflation rate and manufacturing production, US consumer inflation expectations and government budget, China’s new yuan loans, value of outstanding loans, total social financing and money supply M2, as well as Central Bank of Brazil’s focus market readout.