Nio (NYSE:NIO) has pulled back sharply over the past four months, dropping from its year-to-date high of $7 to its current price of $4.37.
Shares recently broke below the key $4.45 support level, and traders are now watching closely as earnings approach. Adding to the intrigue, the stock has also carved out a bullish falling wedge pattern heading into the report.
Nio Earnings Report to Show Strong Revenue Growth
Nio, a top company in the electric vehicle industry, has become one of the fastest-growers in China, helped by its recent launches. Its recent delivery metrics showed that it delivered 35,934 vehicles in July, up by 71% from a year earlier. It has delivered over 227,057 vehicles since January, a 68% annual increase.
Nio has benefited from having three brands that target different customers. Its NIO brand sold 20,008 vehicles in July, while ONVO and FIREFLY sold 10,155 and 5,771 vehicles, respectively.
These deliveries mean that its revenue growth accelerated in the quarter. Benzinga data shows that the estimate is that its revenue jumped by 75% to $2.97 billion, with its growth expected for the remainder of the year.
Nio released a strong financial report for the first quarter, with its revenue rising by 112% to $3.7 billion. Most importantly, this revenue growth was accompanied by margin extension, with its gross margin rising to 19% from 7.6% in the same period a year earlier.
The main reason why the stock has dropped after that report is that it made a $44.8 million net loss, a big reversal from the profit it made in the fourth quarter of last year. Excluding share-based compensation, its net profit for the year was $6.3 million in the first quarter.
Nio has room for growth in the coming quarters, with its international business being a key priority. The company plans to intensify this approach in the markets that are opening up like Europe and Canada.
Nio Stock Price Lost a Crucial Support, But a Bullish Pattern is Forming
Nio stock chart | Source: TradingView
The daily chart shows that the stock has been in a strong sell-off in the past few months. It has recently dropped below the important support level of $4.39, its lowest level in February and March this year.
In theory, moving below that level would be a sign that bears have prevailed. In this case, however, the stock has not dropped substantially from this price, meaning that a clear bearish breakout is not yet confirmed.
Most importantly, Nio has formed a falling wedge pattern, which is made up of two descending and converging trendlines. This pattern often leads to a bullish reversal, especially when the two lines are about to converge. As such, there is a possibility that the stock will rebound potentially to $5.
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