Nio Shares Face Sharp Correction Following Impressive Rally

Nio, the pioneering Chinese electric vehicle manufacturer, delivered an unwelcome surprise to its investors this week. A brutal sell-off on Friday erased nearly 10% of the stock’s value, marking a stark reversal of fortune after the shares had surged more than 37% throughout the preceding month. This dramatic shift highlights the inherent volatility in the EV sector.

Disappointing Holiday Data Triggers Sell-Off

The catalyst for the sharp decline emerged from underwhelming vehicle registration data reported during China’s “Golden Week” holiday in October. This week-long national break resulted in a significant drop in new insurance registrations for vehicles:

• Nio managed only 6,400 new registrations, representing a decline exceeding 40% compared to the previous week.
• The company’s core Nio brand saw registrations plummet by almost 60%.
• The primary reason for this slump was the calendar, as the holiday week contained just two official working days.

While this downturn is largely attributable to the seasonal break, it served to underscore the unpredictable nature of the Chinese electric car market, quickly dampening the previous investor enthusiasm.

Should investors sell immediately? Or is it worth buying Nio?

Record Trading Volume Points to Widespread Investor Anxiety

Friday’s trading session was characterized by intense selling pressure. The volume of shares traded skyrocketed by 103% to over 122 million, a clear indicator of nervousness among the investment community. The share price settled at $6.72, effectively halting the impressive multi-week rally that had previously propelled the stock upward. Such pronounced trading activity suggests that after a period of sustained euphoria, many shareholders moved to secure their profits or cut their losses.

Positive Analyst Sentiment Meets Harsh Earnings Reality

The timing of the correction is particularly noteworthy given the recent bullish stance from several major financial institutions. Just weeks before the sell-off, firms including JPMorgan, Mizuho, and Citigroup had turned more optimistic on Nio’s prospects, with JPMorgan raising its price target to $8. This wave of positive analyst upgrades was a key driver of the preceding rally, which was further fueled by record vehicle delivery figures reported for September and the entire third quarter.

However, the company’s financial performance soon brought investors back to reality. Nio recently reported a loss per share of $0.32, a figure that fell short of market expectations.