XPeng: A Drive Into a Promising Future

Chinese stocks have taken a battering in 2021, as the Beijing authorities’ tightening of regulations has seen investors heading to the exit gates. Despite having overall government support, reflecting the tougher landscape EVs have had to navigate in 2021, Chinese EV stocks have not been spared either. Shares of XPeng, for instance, sit 5% into the red this year.

However, following the company’s Q2 earnings, which Deutsche Bank’s Edison Yu calls “mostly solid,” the analyst sees enough to be buoyed about XPeng’s prospects.

That is despite what Yu calls a “conservative” 3Q21 guidance. The company expects between 21,500 to 22,500 deliveries, below “investor expectations” in the 24,000-25,000 range.

Yu thinks the soft guidance is “almost entirely due to G3i changeover timing.” The model is getting a mid-phase makeover in China, with deliveries beginning in September, and the transition should result in “a few weeks of downtime.” Further down the line, however, in Q4, given “freshness of product and accelerating EV penetration,” the analyst anticipates all 3 XPeng vehicles to deliver strong sales, with management now looking at achieving peak monthly deliveries of 15,000 in the quarter.

With this in mind, Yu raised his 2021 forecasts, now calling for 88,000 deliveries (up from 74,988) and nearly 20 billion RMB in revenue compared to the previous 16.791 billion RMB estimate.

Yu expects more growth in 2022, based on the P5’s full-year contribution and the introduction of a large SUV (G7). However, it is even further ahead when things will really get interesting.

“We think 2023 is strategically the more important year as the company will launch its next-gen global vehicle platform, designed for RHD and LHD markets, unveiling 2-3 new models every year,” the analyst said. “These vehicles will support at the very least XPILOT 3.0 capabilities and we think ultimately the offerings will converge on XPILOT 4.0 over time to streamline the user experience.”

All in all, Yu rates XPEV shares a Buy, while the price target gets a nudge upwards – pushed from $50 to $51, suggesting shares will gain 25% in the year ahead. (To watch Yu’s track record, click here)

Turning now to the rest of the Street, where the overall target is a more optimistic $56, implying share appreciation of ~37% over the coming months. The optimism extends to the analysts’ ratings too – based on a unanimous 7 Buys, the stock qualifies with a Strong Buy consensus rating.

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Author: Marty Shtrubel, TipRanks

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