It’s hard not to be bullish about the electric vehicle sector right now given the rapid advancements in technology. While much attention is given to companies like Tesla (NASDAQ:TSLA) and the newly public Lucid Motors (NASDAQ:LCID), there is a booming electric vehicle industry in the largest automobile market in the world: China.
While other sectors like eCommerce and technology have been hammered by regulatory crackdowns this year, the electric vehicle industry has been more or less unscathed. It could be because the government has a rooted interest in its EV makers prospering, particularly given the ongoing geopolitical tensions between the United States and China.
XPeng (NYSE:XPEV) is one of the big four EV makers in China, alongside Li Auto (NASDAQ:LI), Nio (NYSE:NIO), and Warren Buffet-backed BYD. The company is backed by AliBaba (NYSE:BABA) and was founded and still managed by former AliBaba executives. XPeng has lagged the broader markets so far this year like so many other EV stocks have. Last year proved to be a major breakout for the industry, but so far in 2021 things have not been as lucrative.
XPEV stock has gained a mere 5% Year-To-Date, compared to 141% over the past 12 months. However, XPEV’s YTD return is considered high when compared to its main competitor NIO, which has lost -26.32% Year-to-Date.
European Expansion and Flying Cars
Although they may seem like lofty goals to undertake, XPeng has already started to ship its flagship P7 sedan to the EV hotbed of Norway. XPeng joins Tesla, Nio, and BYD, as international EV makers that are competing for the Norwegian market, with further expansion into the rest of Europe expected within the next year.
XPeng has also been creative in the way they are dealing with the ongoing global chip shortage. Electric vehicles take a much larger number of microchips due to the technology that is onboard. Companies like Nio have seen a dip in vehicle deliveries as production facilities stall, but XPeng continued to see sequential quarterly delivery growth. One reason for this is because XPeng is delivering its vehicles without certain electronic devices installed.
In exchange, XPeng is allowing these customers to return at a later date when the chips are available to be installed in the vehicles. Finally, you read it correctly, XPeng is getting into the business of flying cars. At its recent Tech Day event, XPeng announced a flying vehicle that will also be fit for roads, that will be ready for consumers in 2024. XPeng revealed that it has been testing six different prototypes for the past eight years, and has undertaken over 15,000 tests.
Wallstreet analyst sets $56 valuation on XPEV stock
Despite the strong monthly performance of XPEV stock, the average Wallstreet valuation still remains above the current trading price, indicating analysts still see value in Xpeng shares. The average target on Wallstreet implies a 17.9% upside from the current trading price.
Eunice Lee from Bernstein recently initiated coverage on XPEV stock with an Outperform rating and a $56 valuation. Bernstein noted that “EVs are the future of the Chinese autos landscape”. The analyst added that Xpeng’s P5 SUV model offers favorable value compared to its competition. Interestingly, Lee sees significant room for margin improvement in the future as delivery volumes continue to compound quarter-on-quarter. Bernstein’s model values Xpeng on a 5x 2023E EV/Sales multiple.
Xpeng delivers 25,666 vehicles in the third quarter
XPeng reported 10,412 vehicle deliveries in the month of September, marking a record month for the Chinese EV manufacturer. The result represented a month on month improvement of 44%. For the third quarter, Xpeng delivered 25,666 vehicles which was a 48% improvement quarter on quarter. In fact, the Q3 performance beat Bank of America’s estimate by 15% and the remainder of Wallstreet by 14%-19%.
More recently, for the month of October XPeng posted 10,138 deliveries, just shy of its previous record month. The strong October month saw Xpeng’s cumulative deliveries exceed 100,000 vehicles, which reflects the expanding EV demand in China as well as the companies customer recognition in other target countries.
The Bottom Line – XPEV Stock flying under investors radars?
XPeng often does not get as much publicity as Nio but it may be time for investors to take notice. The company received a generous price upgrade from noted EV analyst Edison Yu who forecasts the stock hitting as high as $57.00 per share. XPeng is also planning on building out its X-Power supercharger network, with upgrades that will see a five minute charge provide a range of 200 kilometers or about 125 miles.
Like with most of its peers, XPeng is firing on all cylinders right now, and with the global EV ownership rapidly growing each year, there is plenty of space in the sector for all of these companies to thrive.
The information above is strictly for informational purposes only and is not financial advice nor does it constitute a recommendation. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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