On Tuesday, XPeng Inc. (NYSE:XPEV) received an updated outlook from a Citi analyst who raised the electric vehicle manufacturer's stock from Sell to Neutral. In conjunction with the rating upgrade, the price target for XPeng shares was also lifted to $8.30, up from the previous $8.30.
The revision in XPeng's stock rating comes amid expectations of a stronger model cycle for the company. Additionally, the introduction of a new smaller car is anticipated to boost the company's export capabilities. Citi's analysis suggests that the current valuation of XPeng presents a balanced risk-reward scenario.
The analyst also noted an increase in the battery electric vehicle (BEV) market penetration rates, which is seen as a positive development for the sector. Furthermore, partnerships, like the one XPeng has with Volkswagen (ETR:VOWG_p), are expected to contribute positively to the company's gross profit margins and advancements in autonomous driving assistance systems (ADAS).
Despite the upgrade to Neutral, Citi refrained from assigning a Buy rating to XPeng. The decision is based on several factors, including challenging BEV demand and supply dynamics, recent weak electric vehicle sales, and a projected weak model cycle that is likely to persist until the fourth quarter of 2024. These concerns temper the more positive outlook and suggest a cautious approach to the company's near-term prospects.
In other recent news, China's National Development and Reform Commission (NDRC) predicts a continued surge in the country's new energy vehicles (NEVs) demand, which will stimulate further development of electric vehicle charging infrastructure. This aligns with China's broader environmental goals and ambition to lead the global auto industry.
In the realm of autonomous driving, China has allowed a select group of automakers, including BYD (SZ:002594), Nio (NYSE:NIO), and Xpeng, to begin public road tests of level three autonomous driving technologies. This move is part of a broader initiative to expedite the integration of highly autonomous vehicles into the market.
XPeng, a significant player in China's technology sector, has been under close scrutiny by Wall Street analysts. Barclays (LON:BARC) and Bernstein SocGen Group have maintained their respective underweight and market perform ratings on the company's stock, with price targets set at $8.00 and $12.00. XPeng's first quarter results were generally in line with expectations, excluding a notable positive impact from high-margin technology services revenues from a partnership with Volkswagen.
The company reported a significant year-over-year revenue increase for the first quarter, attributed to a rise in vehicle deliveries and an increase in average selling price (ASP). XPeng's Q1 revenue reached approximately 6.5 billion RMB, marking a 62.3% increase compared to the same period last year. The company's gross margin for the quarter also significantly improved to 12.9%.
In June, XPeng is gearing up for the launch of its first low-end "Mona" branded car, which is anticipated to possibly boost the company's market presence if the vehicle meets market expectations.
InvestingPro Insights
XPeng Inc. (NYSE:XPEV) has been navigating a turbulent market, but recent data from InvestingPro offers a nuanced perspective for investors. According to InvestingPro, XPeng holds more cash than debt on its balance sheet, which could provide some financial flexibility in the current challenging economic environment. Additionally, the company's liquid assets exceed its short-term obligations, indicating a degree of resilience in managing its immediate financial commitments.
InvestingPro data also reveals that XPeng's revenue has grown significantly over the last twelve months as of Q1 2023, with an impressive 41.64% increase, signaling strong demand for its products. However, it's worth noting that the company's gross profit margins remain weak at 3.95%, reflecting the competitive pressures and high costs associated with the electric vehicle industry.
For investors looking for more in-depth analysis, there are additional InvestingPro Tips available that highlight the company's position as a prominent player in the Automobiles industry and the volatility of its stock price. Moreover, while analysts have revised their earnings upwards for the upcoming period, they do not anticipate the company will be profitable this year.
To explore these insights further and access more exclusive tips, visit InvestingPro's dedicated page for XPeng at https://www.investing.com/pro/XPEV. And remember, you can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription with the coupon code PRONEWS24. There are 9 more InvestingPro Tips waiting to help you make more informed investment decisions.
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