Why Did Nio Stock Jump 10% Today?
Key Points
Nio exceeded its own recent profit estimate in the fourth quarter.
The company also delivered strong Q1 guidance.
Investors should keep an eye on executive compensation.
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Shares of Chinese electric vehicle (EV) maker Nio (NYSE: NIO) shot 10.5% higher at the market open and were still up by 10.1% as of 10:45 a.m. ET. Investors liked what the company had to say in its fourth-quarter report.
Last month, the company surprised investors by saying it expected its first-ever adjusted profit from operations in the fourth quarter. The $100 million to $172 million range was particularly strong, and Nio ended up beating the high end of it.
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Nio achieves first profit
It wasn't just the $178.9 million in adjusted profit from operations that had investors excited. In fact, the company achieved a slight net profit of $40.4 million in Q4. That result was fueled by increased sales volume, an optimized product mix, and lower research and development expenses.
Nio also told investors to expect revenue to double year over year in the current quarter. Vehicle deliveries should also increase by more than 90% compared to the prior year period. The strong results led Citigroup analyst Jeff Chung to note that new models are coming soon, and future expenses can continue to drop as battery costs decline. He has a price target of $6.20 on the shares, according to Barron's. That represents 25% upside from Monday's closing price.
Investors should keep an eye on executive compensation, though. The company's board of directors approved a large 2026 stock incentive plan for founder and CEO William Li. The grant of more than 248 million shares, valued at up to $1.2 billion, will depend on meeting specific performance targets related to the stock's valuation and net profits.
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Citigroup is an advertising partner of Motley Fool Money. Howard Smith has positions in Nio. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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